Obama to Limit CEO Pay to $500K

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Re: Obama to Limit CEO Pay to $500K

Postby The Great Hippo » Thu Feb 05, 2009 4:09 pm UTC

MoghLiechty2 wrote:So to solve this, we're going to force the companies to lower their CEO pay? Is that going to make it so that future CEO's don't make bad business decisions? I'm aware that these companies' decisions contributed to the collapse, but how is forcably lowering the pay going to help?


By changing the atmosphere from one that accommodates mediocrity and satisfying immediate monetary needs ("this will be good in the short run and SHIT-HORRIBLE in the long run, but I won't be here in the long-run so HA!") to one that rewards long-term planning. Besides, the CEOs who are in it for the shitton of money are probably not the ones you want; you want the ones who love the job (we have this same exact problem in the teaching sector).

Anyway, this isn't about a silver-bullet solution. In the end, this is about punishing scapegoats. The CEOs were assholes, but so were a metric fuckton of other people. But when a company does some stupid shit, it's the CEOs who get nailed to the wall. From what I understand, that's part of their job description.

(And yeah, I know, this has some issues--this only applies to salaries and as we've seen salaries aren't the bulk of where compensation comes from--and it's not like this is really addressing the issue of corporate greed and inadequate long-term planning--but it's something, so I at least am not opposed to making CEOs wear funny hats and do fancy jigs for their corporate welfare checks)
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Re: Obama to Limit CEO Pay to $500K

Postby Terebrant » Thu Feb 05, 2009 4:12 pm UTC

MoghLiechty2 wrote:
22/7 wrote:Of course they didn't fail because they payed their CEOs too much. You're intentionally asking the wrong question to muddy the water here. Yes, the CEOs did screw up their jobs by allowing their companies to do things like issue or buy up shittons of terrible, terrible loans which significantly contributed to the market collapse. So basically, you're trying to take a cause and turn it into an effect. No deal.


So to solve this, we're going to force the companies to lower their CEO pay? Is that going to make it so that future CEO's don't make bad business decisions? I'm aware that these companies' decisions contributed to the collapse, but how is forcably lowering the pay going to help?

It might help by reducing their cognitive dissonance which will help them take better decisions.

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Re: Obama to Limit CEO Pay to $500K

Postby iop » Thu Feb 05, 2009 4:20 pm UTC

MoghLiechty2 wrote:So to solve this, we're going to force the companies to lower their CEO pay?

So you suggest that to reduce costs the companies should rather keep increasing the CEO's salaries for no good reason, while lowering everyone else's?

Also, as (long-term) stock options are not actually included in the 500k$ cap, the reduction would be more on the level of 50%.

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Re: Obama to Limit CEO Pay to $500K

Postby MoghLiechty2 » Thu Feb 05, 2009 4:39 pm UTC

iop wrote:
MoghLiechty2 wrote:So to solve this, we're going to force the companies to lower their CEO pay?

So you suggest that to reduce costs the companies should rather keep increasing the CEO's salaries for no good reason, while lowering everyone else's?

Also, as (long-term) stock options are not actually included in the 500k$ cap, the reduction would be more on the level of 50%.

I don't think it can be persuasively argued that it's possible for high CEO salaries to be a determining factor in a company going under. A CEO is getting compensated 10 million in a company that's under 50 billion, so the failure probably has more to do with what the CEO did than what he got paid. The ratio of how much a CEO gets paid to how much his decisions affect the company is much much lower than, say, an entry-level stockbroker. Think about it, a CEO might get 10 million dollars (200 times an entry level), but his decisions could single-handedly destroy a company, or make it the most successful in the industry.
...
One thing from my OP link that I (might) like though:
Companies bailed out by Uncle Sam are permitted to waive the $500,000 rule if they disclose executive compensation and allow investors a nonbinding vote on executive pay.


Stockholders having more say in CEO's pay is always good.

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Re: Obama to Limit CEO Pay to $500K

Postby iop » Thu Feb 05, 2009 4:59 pm UTC

MoghLiechty2 wrote:I don't think it can be persuasively argued that it's possible for high CEO salaries to be a determining factor in a company going under.

I don't think that is the case either. However, I don't think it can be persuasively argued that the dramatic increase in CEO salaries in the last 25 years is really justified (at least not according to the research I linked to). Furthermore, I think that despite your strong support for the very high CEO salaries, they are not as well liked by the majority of the population, whose money is supposed to be going toward the CEO's paycheck.
Finally, an relatively lowly stockbroker can easily destroy a company.
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Re: Obama to Limit CEO Pay to $500K

Postby cerbie » Thu Feb 05, 2009 5:45 pm UTC

MoghLiechty2 wrote:
22/7 wrote:Of course they didn't fail because they payed their CEOs too much. You're intentionally asking the wrong question to muddy the water here. Yes, the CEOs did screw up their jobs by allowing their companies to do things like issue or buy up shittons of terrible, terrible loans which significantly contributed to the market collapse. So basically, you're trying to take a cause and turn it into an effect. No deal.


So to solve this, we're going to force the companies to lower their CEO pay? Is that going to make it so that future CEO's don't make bad business decisions? I'm aware that these companies' decisions contributed to the collapse, but how is forcably lowering the pay going to help? Sure, it'll make the bad executive leave (if we ... want that?), but then how is the company going to find a better one?

Seen on monster.com: "Help wanted: Chief Executive Officer for failing financial institution. No experience? No problem! We only pay 5% what you would get anywhere else!"
If they want to do it that way, yes. Otherwise, they can apply things like stock options, which can't be exercised until the company is well above water. Remember: every one of these companies can keep their current practices, if they just say no. I see a big point of it as to shake them up a bit. The pay scale and business structure at the larger companies involved here are out of touch with the rest of the world. That, including pay scales, is not a new criticism. But now they've gone and fucked those parts of the world they are out of touch with. The bailout now has baby teeth. I hope for long sharp ones (...and that his little CIA thing doesn't get out of hand, 'cause I'm not digging that one).
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Re: Obama to Limit CEO Pay to $500K

Postby 22/7 » Thu Feb 05, 2009 6:31 pm UTC

MoghLiechty2 wrote:So to solve this, we're going to force the companies to lower their CEO pay? Is that going to make it so that future CEO's don't make bad business decisions?
It's not Obama's job to solve this problem. That's each individual company's job. It's Obama's job to provide the necessary funds and business conditions and to make sure that there are strings attached to those funds so that the American people don't hand over billions of dollars and get nothing in return. This string is more symbolic than anything, indicating that this company fucked up bad enough that they needed the tax payers to bail them out. It's not unreasonable for some humility to accompany such a request.
Totally not a hypothetical...

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Re: Obama to Limit CEO Pay to $500K

Postby Kachi » Thu Feb 05, 2009 9:14 pm UTC

Much as I can appreciate the spirit of this proposal, I think it's just going to be loopholed to shit.

See, when you have an employee that you want to keep at the cost of exorbitant sums of money, but you can't, you fire them.

Then, you pay them exorbitant sums of money to be a private consultant for your company.

A loophole like that can be closed somehow. It has to be policed still, but at least you can close it on paper. But there are just so many ways to work around the letter of the law when it comes to reimbursements. :?

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Re: Obama to Limit CEO Pay to $500K

Postby HighCharity » Thu Feb 05, 2009 9:21 pm UTC

Even though I disagree with nearly everything Obama says, I actually agree with him on this. If these CEO's have screwed up there own company so much that they actually need a bailout, they don't get shitloads of our money
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Re: Obama to Limit CEO Pay to $500K

Postby Malice » Fri Feb 06, 2009 3:25 am UTC

I think you're making it way too complicated. I think it's as simple as, we're giving them this bailout to keep their company running, and spending tens of millions of it on a CEO's personal salary is wasteful, especially when the CEO has proven he's not worth that. It's as if we gave them a bailout and said, "But no using this money to buy Superbowl ads or remodel your offices in solid gold furniture, that's not what it's for."
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Re: Obama to Limit CEO Pay to $500K

Postby Rysto » Fri Feb 06, 2009 3:34 am UTC

Gunfingers wrote:And remember that their pay is set by the shareholders, people who's income is dependent upon the company not wasting money.

No, it's set by the Board of Directors.

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Re: Obama to Limit CEO Pay to $500K

Postby Gunfingers » Fri Feb 06, 2009 1:35 pm UTC

Board of directors being the people with the largest interest in the company. I know this stuff, i play EVE.

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Re: Obama to Limit CEO Pay to $500K

Postby mosc » Fri Feb 06, 2009 5:22 pm UTC

See, I just don't have much faith that these CEOs do anything useful in general. I don't think an individual can steer a large company so effectively that some other individual would have done considerably worse. I reject the notion that the job is so much more important than any other job that it needs 1000x the pay of the janitor who cleans his office.
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Re: Obama to Limit CEO Pay to $500K

Postby 22/7 » Fri Feb 06, 2009 6:12 pm UTC

Even though the decisions that the janitor makes have no effect whatsoever on whether or not the company is profitable or crumbles?

Also, your first two sentences don't really make sense back to back. In the first, you're essentially saying CEOs don't do anything and in the second you're saying that they're not doing anything that someone else couldn't do.
Totally not a hypothetical...

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Re: Obama to Limit CEO Pay to $500K

Postby Telchar » Fri Feb 06, 2009 6:53 pm UTC

Can I ask why we are stopping at CEOs? I mean, if you want to hold those you beleive responsible for the curent economic crisis responsible by setting conditions on the money, why stop at CEOs? Why not CFOs? Or any high-level execs?
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Re: Obama to Limit CEO Pay to $500K

Postby 22/7 » Fri Feb 06, 2009 6:57 pm UTC

My understanding (from NPR) is that the wording was vague enough to include CEOs, CFOs and the like. The problem, however, is that while you could cap these peoples' compensation at half a mil, you might still be paying the people right below them 8 or 10 million a year.
Totally not a hypothetical...

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Re: Obama to Limit CEO Pay to $500K

Postby Telchar » Fri Feb 06, 2009 7:03 pm UTC

22/7 wrote:My understanding (from NPR) is that the wording was vague enough to include CEOs, CFOs and the like. The problem, however, is that while you could cap these peoples' compensation at half a mil, you might still be paying the people right below them 8 or 10 million a year.



This!

Thank you.

Edit: I was just thinking that they could also demote themselves to some other position in the company. Or the company could get rid of CEO as a title and create something else. The only way to get around that would be to name them in the law, or specify a person in authority of the company at the time the bailout is taken, which they can still get around but it's more difficult.
Zamfir wrote:Yeah, that's a good point. Everyone is all about presumption of innocence in rape threads. But when Mexican drug lords build APCs to carry their henchmen around, we immediately jump to criminal conclusions without hard evidence.

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Re: Obama to Limit CEO Pay to $500K

Postby v1nsai » Fri Feb 06, 2009 7:14 pm UTC

It's so infuriating to see a few greedy people trampling the millions, and doing so completely legally. John Thain should get one good punch to the mouth and then sent out on the streets to survive. Greed is a really nasty thing...

Go Obama for doing something about it, we're going to see some really amazing changes implemented by our president. He will always remember where he came from. And I don't think we're descending into communism, we're just injecting a little logic into a system that has been abused for too long.
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Re: Obama to Limit CEO Pay to $500K

Postby btilly » Fri Feb 06, 2009 8:18 pm UTC

Who else saw the Bank of America's CEO saying that Bank of America won't need another bailout and wondered whether that was connected with this policy?
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Re: Obama to Limit CEO Pay to $500K

Postby cerbie » Fri Feb 06, 2009 9:00 pm UTC

btilly wrote:Who else saw the Bank of America's CEO saying that Bank of America won't need another bailout and wondered whether that was connected with this policy?
I doubt it. BoA got money the first time mostly to sweeten the takeover deal for ML. They weren't in dire need. With the threat of any decent restrictions or oversight, why take more? I could see them taking more, if the government were once again giving out free candy. But, I think it was clear, even before the $1/2mil thing, that that was not going to happen this time.
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Re: Obama to Limit CEO Pay to $500K

Postby btilly » Fri Feb 06, 2009 10:38 pm UTC

cerbie wrote:
btilly wrote:Who else saw the Bank of America's CEO saying that Bank of America won't need another bailout and wondered whether that was connected with this policy?
I doubt it. BoA got money the first time mostly to sweeten the takeover deal for ML. They weren't in dire need. With the threat of any decent restrictions or oversight, why take more? I could see them taking more, if the government were once again giving out free candy. But, I think it was clear, even before the $1/2mil thing, that that was not going to happen this time.

They weren't in dire need, but from what I've read their situation now is substantially worse than it was. Their stock price has hit 25 year lows. Their preferred stock's rating just went from "junk" to "worse junk". The CEO is speaking up because people think they need the help. I'm still not convinced that his reaction is not tied to his personal compensation.
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Re: Obama to Limit CEO Pay to $500K

Postby Diadem » Sat Feb 07, 2009 3:00 am UTC

It seems to me like he's going about this the wrong way.

If a CEO fucks up, you should fire him, preferably without giving him any compensation or bonus. Then you hire a new CEO who can do better. You want the best possible CEO for your company, and that's going to be expensive. However if he does succeed in keeping your company from failing, he's worth it.

Restricting the salary of a new CEO because the old one fucked up is both unfair and stupid. Keeping the old CEO at a lower salary is fair, but still stupid.
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Re: Obama to Limit CEO Pay to $500K

Postby psyck0 » Sat Feb 07, 2009 4:26 am UTC

It really shouldn't be so expensive to fire CEOs if they screw up. Normal people don't get paid off so well for incompetence. I'm not sure many get paid off at all, although I've never been fired so I don't know for sure.

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Re: Obama to Limit CEO Pay to $500K

Postby mosc » Sat Feb 07, 2009 6:41 am UTC

22/7 wrote:Also, your first two sentences don't really make sense back to back. In the first, you're essentially saying CEOs don't do anything and in the second you're saying that they're not doing anything that someone else couldn't do.

I'm saying that CEO's are maybe 10x as important as general employees. Probably less. Also, there will be no shortage of extremely qualified and motivated people ready willing and able to take a 500k per year job at any company that has enough money to pay 500k per year. I think that's a given.
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Re: Obama to Limit CEO Pay to $500K

Postby Telchar » Sun Feb 08, 2009 9:34 am UTC

mosc wrote: there will be no shortage of extremely qualified and motivated people


citation? Every indication we have is that very few actually have the skillsets and knowledge to be a succesfull CEO.
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Re: Obama to Limit CEO Pay to $500K

Postby Kachi » Sun Feb 08, 2009 1:23 pm UTC

If it's such a taxing position, I'm quite confident that with the amount of money these guys are getting paid, you could hire an entire -team- of highly skilled and qualified people, simply appointing the most qualified to be the primary decision maker. Actually, it seems dubious to me that any person that's not providing the cure for cancer can possibly output the net worth of these salaries. Meanwhile, you could sometimes create a hundred jobs from the one person's salary and bonuses.

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Re: Obama to Limit CEO Pay to $500K

Postby Telchar » Sun Feb 08, 2009 4:32 pm UTC

That's like saying that, because underwater welders get paid a lot, there MUST be a ton of people who can do it. Which doesn't follow.
Zamfir wrote:Yeah, that's a good point. Everyone is all about presumption of innocence in rape threads. But when Mexican drug lords build APCs to carry their henchmen around, we immediately jump to criminal conclusions without hard evidence.

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Re: Obama to Limit CEO Pay to $500K

Postby Mysidic » Sun Feb 08, 2009 10:03 pm UTC

Telchar wrote:That's like saying that, because underwater welders get paid a lot, there MUST be a ton of people who can do it. Which doesn't follow.


Of course, to be a welder at all you have to get some certification that demonstrates you know how to weld.(Even more required for underwater) judging from certain CEO's performances, businesses need a lot better method of determining who's worth the money.

Not that all CEO's are bad, or even most, but competence should increase before we start talking about big salaries again. I'm sure however, that loopholes will be found to get around the $500k.
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Re: Obama to Limit CEO Pay to $500K

Postby Philwelch » Wed Feb 11, 2009 7:50 am UTC

Jack Saladin wrote:The point the people in the OP seem to be missing is that it's still 500k of public money. If it wasn't for the public paying for them, they wouldn't be getting anything. The citizens of the United States are shelling out billions upon billions of dollars to keep these companies afloat - should the executives of these companies really be able to just pocket that cash to buy themselves another house or ten more cars? Is that really where you want your tax dollars going?


Most people don't need all the money they're paid, but that doesn't mean they aren't worth the money they're paid.

Fire the CEO's who got into this mess, absolutely. But if you're going to hire a better CEO who knows what he's doing, you pay the market price for that CEO, or you get someone incompetent.

Your argument is in principle no different than "do we REALLY need to waste taxpayer money on the IT guy so he can go home and buy ten more video games this month?". It would be nice and wonderful to live in a world where qualified professionals worked for the love of the job and were all willing to voluntarily take a pay cut, but here in the real world, outside of John Lennon's imagination, that's not how things work.
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