US Government Wants to Control Private Sector Compensation

This noise has been getting louder and louder, particularly since the new administration came to town.

US government seeks to rein in executive pay (6/11/09 AP): [emphasis is mine]

"The Obama administration is taking a half-step toward taming U.S. executive pay. Some lawmakers prefer a fuller stride.

"Democrats on the House Financial Services Committee [that is "Fannie and Freddie are fundamentally sound" Barney Frank's committee] said Thursday the administration's efforts to hector the private sector into reining in executive pay might not go far enough.

"The administration contends that excessive compensation contributed to the U.S. financial crisis, but rejects direct intervention in corporate pay decisions."

Excessive compensation contributed to the U.S. financial crisis.... Did it? How about other "contributing" factors? The government's policies over the past 20 years - loose monetary policy, loose (non-existant) regulation of financial industry, misguided (in retrospect) housing policy, etc., and the Federal Reserve that enabled the government by providing cheap money and credit.

(High risk, high reward. They want to turn that into high risk low reward and low risk low reward. What fun is that?)

Oh, never mind. I forgot. It all happened before the current government came into existence. Never mind also that almost all Congressmen/women and Senators who voted for that highly unpopular bailout bill back in September 08 have been voted back in by the constituents with very short memory. It must be still different, because we have a new President.

Let's get back to the article:

"Gene Sperling, a counselor to Treasury Secretary Timothy Geithner, said administration guidelines call on all publicly held companies to link compensation to long-term performance, not short-term gains.

"We believe that compensation practices must be better aligned with long-term value and prudent risk management at all firms, and not just for the financial services industry," Sperling said."

Here we come. At all publicly held firms. Why should it be the government's business to force all publicly held companies to link compensation to long-term performance? Better aligned with long-term value? Whose long-term value? The firms', or the government's?

"While the administration has approached the issue with caution, a top Republican said the plans amounted to "incessant government intervention."

""The president cannot continue his heavy-handed meddling in the private sector and expect it to function, much less flourish," said Rep. Tom Price, chairman of the Republican Study Committee.

"Alabama Rep. Spencer Bachus, the top Republican on the committee, added: "We need to get government out of businesses.""

Republicans? What Republicans? Representative Tom Price doesn't seem to get it yet; the president may not want the private sector to function, much less flourish (see this post and link in the post). Why would he assume the president wants it to function and flourish?

And here comes the Pay Czar. All please rise. If you work for one of these companies - Citigroup Inc., Bank of America Corp., General Motors Corp., Chrysler LLC, American International Group Inc., GMAC LLC and Chrysler Financial - you'd better be nice. He can nullify your pay package that you and your employer duly agreed upon, if he thinks you are earning too much.

(Where are Fannie and Freddie? Shouldn't they be part of the seven?)

"The administration named Kenneth Feinberg, a lawyer who oversaw payments to families of Sept. 11, 2001 terrorist attack victims, as a "special master" with power to reject pay plans he deems excessive at the seven companies with the biggest injections of public money. Feinberg also would have authority to review compensation for the top 100 salaried employees at those companies."

Mr. Feinberg is also overseeing the payment from the fund created in the aftermath of Virginia Tech shooting in 2007.

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