Socialism, the New Capitalism
Jul 31, 2020135K Shares2M Views
Among the myriad absurdities surrounding the current negotiations over the Bush administration’s $700 billion Wall Street bailout plan, perhaps none rises to the level of the conflict over CEO pay.
Briefly, the Democrats’ strategy, unveiled yesterday, would place unspecified limits on the pay packages for heads of failed companies. By contrast, Treasury Sec. Henry Paulson wants no government hand in what companies — even those who benefit from an eventual bailout — pay their executives. Paulson went on the record numerous times over the weekend to say as much.
“If we design it so it’s punitive and so institutions aren’t going to participate,” Paulson told Fox News on Sunday, “this won’t work the way we need it to work.”
Which begs the very relevant question: Huh?
What company on the verge of collapse would refuse rescue for the sake of a few million dollars in executive pay? What CEO would turn down billions from Washington to preserve his or her golden parachute? (Answer: None. Or at least none deserving that golden parachute.)
Which brings up the issue of merit-based pay — a very American ideal, but not one evidently shared by Wall Street companies. Take, for example, Richard Fuld, the CEO of Lehman Brothers since 1994. He took home roughly $354 million over the past five years, according to Forbes. His talent? All he had to do was run the company into the ground by betting a bit overzealously on mortgage-backed investments (Lehman Bros. filed for bankruptcy last week.)
As Nicholas D. Kristof asked in his New York Times columnlast week: “Perhaps it’s understandable that C.E.O.’s are paid heroically when they succeed, but why pay prodigious sums when they fail?”
That’s the same question many members of Congress are asking this week. Among them is Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, who revealed little patience yesterday for Paulson’s plan to let taxpayers, in effect, cover enormous CEO compensation packages.
“It’s inconceivable,” Frank told reporters, “that people would say the taxpayer should put some money at risk because of bad decisions made by people who would then continue to be rewarded without any restriction and, in fact, would be rewarded for their mistakes.”
Ridiculous? Yes. But inconceivable? Maybe not coming from a Treasury secretary who once headed Goldman Sachs (which, to prevent its own collapse, went from investment bank to holding company statusthis week) and a C-student president who once ranseveral oil companies into the ground.
Meritocracy, indeed.
Rhyley Carney
Reviewer
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