President Barack Obama wants to impose a $500,000 pay cap on

[Fittster]

President Barack Obama wants to impose a $500,000 pay cap on executives whose firms receive government financial rescue funds, a dramatic intervention into corporate governance in the midst of financial crisis.

The new restrictions, described by an administration official familiar with the new rules, are to be announced Wednesday morning at the White House. The steps set the stage for the administration's unveiling next week of a new framework for spending the money that remains in the $700 billion financial rescue fund.

"If the taxpayers are helping you, then you've got certain responsibilities to not be living high on the hog," President Barack Obama said Tuesday."

source

That's going to make a few people in the UK look over paid.

[Ewan S]

Without having looked at the source, I think this is a great idea. We've all heard how GM and ford executives turned up with their begging bowls for cash in their own private jets. Or how the chief execs of one british bank went abroad for a brain storming session with the money from our government.

I'm sure the theory is that if they have to work hard to make a difference then maybe the company will profit from it, then they can pay back the governments money and then these top guys can be paid whatever they're actually worth. Unless of course they're the ones that said ooh yes pontiac aztec/ford scorpio - yes go ahead and make it. Or the ones that think vauxhall build quality levels are something to aim at when lotus were building the vx220 - it'll do...

I was reading that Weideking - the boss of Porsche - is on millions per year. Good for him, he worked his way up and turned a company that in the 80's was nearly defunct to I believe one of the more profitable car companies out there.

Should I don a flame proof suit now?

[abels]

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

[Greenie]

These companies are in an awful lot of trouble and need some seriously talented people to get them out of it. $500,000 doesn't get the best or even very good. So it is an extremely bad idea to cap the salaries.

[Swilly]

abels said:

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

Surely the point here is that every bank a person worth their salt would want to work in is going to be affected by this.

[Fittster]

abels said:

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

But if paying a large salary resulted in the employment of good management these firms wouldn't be in the pickle they are in needing government support.

[Wadeski]

Fittster said:

abels said:

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

But if paying a large salary resulted in the employment of good management these firms wouldn't be in the pickle they are in needing government support.

I was about to say the same, lol if you're paying people five million a year and you have to take gov handouts, they need to work a bit harder for their five mil or take a pay cut!

[Oakey]

People in these positions with these ridiculous salaries don't really have any incentive to do a good job. Why should they? Even if they only last in the position for a year or two they're quids in.

[MaxAndRuby]

A top Manhattan based banker won't get to "first base" on $500,000pa. They'll go elsewhere.

[Chainguy]

MaxAndRuby said:

A top Manhattan based banker won't get to "first base" on $500,000pa. They'll go elsewhere.

Those top Manhattan bankers haven't really been a lot of cop though lately, have they?

[abels]

Fittster said:

abels said:

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

But if paying a large salary resulted in the employment of good management these firms wouldn't be in the pickle they are in needing government support.

Swings and round abouts. Are you going to get decent executives to replace the incompetent ones for less money? I think not.

[MaxAndRuby]

Chainguy said:

MaxAndRuby said:

A top Manhattan based banker won't get to "first base" on $500,000pa. They'll go elsewhere.

Those top Manhattan bankers haven't really been a lot of cop though lately, have they?

I agree, so sack them.

[Oakey]

abels said:

Fittster said:

abels said:

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

But if paying a large salary resulted in the employment of good management these firms wouldn't be in the pickle they are in needing government support.

Swings and round abouts. Are you going to get decent executives to replace the incompetent ones for less money? I think not.

Shouldn't they have to prove they're decent executives in the first place and not just as incompetent as the previous guy they've just got rid of who doesn't really give a stuff as he's just walked away with £xyz million?

If they're that good they'll demonstrate this and be rewarded for it as appropriate.

[Chainguy]

MaxAndRuby said:

Chainguy said:

MaxAndRuby said:

A top Manhattan based banker won't get to "first base" on $500,000pa. They'll go elsewhere.

Those top Manhattan bankers haven't really been a lot of cop though lately, have they?

I agree, so sack them.

Amen brother

[abels]

Oakey said:

abels said:

Fittster said:

abels said:

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

But if paying a large salary resulted in the employment of good management these firms wouldn't be in the pickle they are in needing government support.

Swings and round abouts. Are you going to get decent executives to replace the incompetent ones for less money? I think not.

Shouldn't they have to prove they're decent executives in the first place and not just as incompetent as the previous guy they've just got rid of who doesn't really give a stuff as he's just walked away with £xyz million?

If they're that good they'll demonstrate this and be rewarded for it as appropriate.

Fair point and this is why the old bonus system worked well. Unfortunately the system has been abused somewhat with bumper bonuses being paid out even when companies are making a loss.

[MKnight702]

I agree that the $500,000 cap on salaries is a great idea going on past performance but also that it may well disuade the "best" managers. To counter this I would perhaps add performance bonuses to reward those that show genuine improvement (rather than phantom paper profits based on the premise that property cannot reduce in value).

[Fittster]

abels said:

Fittster said:

abels said:

So what happens if an executive leaves one of these companies and needs to be replaced? Surely no one worth their salt is going to want to work for that amount?

But if paying a large salary resulted in the employment of good management these firms wouldn't be in the pickle they are in needing government support.

Swings and round abouts. Are you going to get decent executives to replace the incompetent ones for less money? I think not.

If it is a choice of incompetents might as well have the cheap one.

[Oakey]

Guam said:

To many so called "Desirable Executives" basically failed their way to the top, just dig around in their background. Frankly if these guys were running their own business, they would need to be taking a paycut ,to help the business out in a recession anyhow. I dont see the issue of employing a high flier on the premise, if you pay down the debt turn the ship around and get the company back into regular profit, we will pay you a bonus equivalent to X% of the Nett Profit.


If they wont work on that basis then you dont want them anyhow.

Also the demand for the guy who turned one of these turkeys around, would be immense and like Top internationals, they would be able to write their own ticket when they came to exit

Isn't George Bush Jnr one of them?

[Oakey]

Guam said:

Oakey said:

Guam said:

To many so called "Desirable Executives" basically failed their way to the top, just dig around in their background. Frankly if these guys were running their own business, they would need to be taking a paycut ,to help the business out in a recession anyhow. I dont see the issue of employing a high flier on the premise, if you pay down the debt turn the ship around and get the company back into regular profit, we will pay you a bonus equivalent to X% of the Nett Profit.


If they wont work on that basis then you dont want them anyhow.

Also the demand for the guy who turned one of these turkeys around, would be immense and like Top internationals, they would be able to write their own ticket when they came to exit

Isn't George Bush Jnr one of them?

hard to argue with

It was a genuine question, in the back of my mind I'm sure I recall he had a string of failed companies / positions and basically ended up as the executive (President)

Edited by Oakey on Wednesday 4th February 16:54

[RDMcG]

I think a blanket cap will fail. In any case its about the bonus structure. It needs to be revised to be a deferred bonuse structure that is paid out based on the long term health of the company and on sustainable deals. It should include recapture provisions so that bonuses are not paid for subsequently failed deals that had short term success.
Nobody cared when everyone was making money, but the assymetry of huge bonuses with a colossal destruction of investor wealth,ordinary peoples' pensions and home ownership cannot continue.