Tuesday, February 10, 2009

It Pays To Pay Attention

When I first heard of the proposal to implement a limit on the salary paid to an executive of a company that received federal assistance (bailout money), my immediate thought was "good idea." The version that I heard indicated that direct compensation would be limited to an annual salary of $500,000 (quite a bit more than I make!) and any additional compensation would have to be in the form of shares of company stock. Since there would be restrictions on the shares regarding value and when they could be sold (hopefully for a profit), there would be considerable incentive to improve the performance of the company thereby increasing the value of the stock - for the executive as well as the average shareholder.
But then the specifics have begun to come to light, where it is harder to withstand the proper scrutiny it deserves, and it is apparent to me, at least, that the whole proposal is just more grandstand politics. As Jim Jubak aptly explains, the salary cap is a joke! That horse has already left the barn! The cap will not be applied retroactively thus having little to no actual value to the shareholders of these companies let alone the taxpayer. Pay attention people, there is going to be a quiz and you will need your wallet instead of a number two pencil!

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