President Obama on Wednesday announced a salary cap of $500,000 for top executives at companies that receive large amounts of bailout money, calling the step an expression not only of fairness but of “basic common sense.”
“We all need to take responsibility,” the president said as he prompted Congress once again to act on his economic stimulus program and repeated his accusations that some Wall Street executives had shown “the height of irresponsibility” when millions of non-wealthy Americans were bearing the burden of Wall Street’s failures.
The people are sick and tired, Mr. Obama said, of seeing Wall Street executives come to the government “hat in hand when they were in trouble, even as they paid themselves customary lavish bonuses.”
“This is America, and we don’t begrudge wealth,” the president said. But Americans definitely begrudge “executives being rewarded for failure,” especially if their earning are subsidized by taxpayers, he said.
Naturally, not everyone is happy about this announcement:
“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”
Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.
“It would be really tough to get people to staff” companies that are forced to impose these limits, he said. “I don’t think this will work.”
I invite these execs to join the rest of us in hunting for jobs right now if they feel so inclined. Strangely, I'm just having a hard time imagining a flood of talent away from Wall Street right now.