Question of the Day – Pay Cap

Question of the Day. Is it a good idea to place a $500,000 executive pay cap on businesses that accept bail-out money?

14 thoughts on “Question of the Day – Pay Cap

  1. Yes, if it would keep companies from going for the bailout. However, I don’t for a moment think that the $500k cap is enforceable.

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  2. I’m for this as long as the Yankees and Red Sox are required to sign up for a bailout and thus limit their payrolls appropriately. It could be a banner day for Royals fans!!!

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  3. I think it is a good idea — part of the problem, on a pretty basic level, is that the folks in charge have lost touch with the real impact of their decisions on the lives of others. If they’re forced to live on $500,000 per year, they may have to make decisions that end up decreasing their standard of living. Thus, when they ask their employees to take a 20% pay cut, they understand the kinds of adjustments that are necessary.

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  4. Forget caps; tie salary to actual performance!
    If they hit grand slams, they can make gazillions. But if they strike out…

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  5. If they hit grand slams, they can make gazillions. But if they strike out…
    That’s what they claimed they were doing all along. It’s the incentive to cook the books and, for some, to lie about the whole system, all in order to get the big bucks and justify it. “We’re getting a bazillion dollars but it’s because we add real value to the company.” Suuuure.

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  6. I liked what I used to hear was Ben & Jerry’s model, something like the CEO can’t make more than 15x the lowest paid worker. I have no idea if it’s true or not, but it seems like having handful of people’s wages way out of line with everyone else’s hasn’t been a good model.

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  7. “If they hit grand slams, they can make gazillions. But if they strike out… ”
    Gambling with someone else’s money is always profitable.

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  8. “I liked what I used to hear was Ben & Jerry’s model, something like the CEO can’t make more than 15x the lowest paid worker. I have no idea if it’s true or not, but it seems like having handful of people’s wages way out of line with everyone else’s hasn’t been a good model.”
    When they sold the company I bet they got more than 15X the lowest pay scale.

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  9. Yes, the incentive for bonuses has always been there. But the opposite has not been. There have never been performance penalities.
    And no, it has not been like gambling — at least not like gambling at any casino I know. At real casinos, when you lose, you lose. On Wall Street, everybody won, even when they — I mean, we — were losing.
    Well, except us.

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  10. RC, I’m not quite sure what you are talking about when you say performance penalties. You could always screw-up and lose your job/investment. It is still happening today if you happen to be in a business that is small/not politically connected enough. The bailout is stopping that penalty from applying to the really big players (because if we don’t the world will end or something). If you stop the down-side and keep the upside, you have, as Lisa V says just above this, public risk and private gain.

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