Greed is Good, But Not When You Haven't Earned It

It was announced that the Obama administration will limit the pay of executives at the 7 companies that were the largest recipients of federal aid. It is also attempting to create strict compensation reforms. This move is in response to the overwhelming public outcry over the news of the millions of dollars in salary, bonuses, and perks these top executives received in the midst of a corporate crisis.

I applaud this measure, with reservations and amendments. The era of Golden Parachutes needs to come to an end. In a healthy economy, corporate executives need to be held accountable by their investors and stockholders, but they have not been. The financial industry tanked, employees were laid off, and these companies lobbied Washington for a bailout, which they received. As their companies have returned to profitability, these executives feel entitled to the same level of absurd compensation as the status quo. However, when they accept taxpayer money to save their sinking ship from bankruptcy, they forfeit their "right" to excessive fringe benefits and bonuses.

I'm glad that several of the banking institutions have been able to repay a significant amount of their bailouts, but until they are out of the red, they should use common sense. They have implicitly given the government the ability to limit their compensation during their period of indebtedness and should not try to push the envelope.

Nevertheless, the Obama administration should refrain from enacting permanent regulations that cap executive compensation. That level of public intrusion in the private sector is a step toward socialism. If they want to have a lasting, positive effect on this issue, the administration should push the Fed and SEC to enact regulations that give stockholders greater power to hold CEO's accountable.

Common Since: Million dollar bonuses and benefits should not be permitted for corporate executives whose companies have accepted government bailout loans. They are indebted to the American taxpayer, and returning that money must be their priority. Corporate governance reform is imperative, but should not take the form of a permanent restriction on business practices. The best solution is to encourage greater accountability between a corporation and their stockholders/investors.