Business

<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Monday, October 26, 2009 Bailout ought to come at a cost to recipients A pay cut for some executives at troubled firms could clear out those in it for the wrong reasons. By Mike Benbow Business Editor There are a lot of areas where I don't agree with the Obama administration, but I can say nothing but amen for its plan to pare the salaries of the highest paid executives at the seven companies with the biggest government bailout. “The taxpayers are in deep with these seven companies, and one of my primary obligations is to see to it that the taxpayers' dollars are returned to the U.S. Treasury,” said Kenneth Feinberg, the special master for executive compensation under the $700 billion Troubled Asset Relief Program, or TARP. Feinberg said it wouldn't be fair to be punitive about executive compensation, but it was important to set limits. I'm not sure that I agree with him on being punitive, but I'll settle for setting limits. That the greatest minds for so many financial companies made billions while we have to bail out their companies with tax dollars doesn't sit well with me. We really need to turn off the cash spigot and start paying people based on results. The companies involved are American International Group Inc., Citigroup Inc., Bank of America Corp., General Motors Co., Chrysler and those automakers' financing arms, GMAC and Chrysler Financial. The Associated Press reported that altogether, they have received $240 billion, more than half, of the TARP money invested so far. Feinberg plans to cut total compensation of the 25 highest-paid employees at each company by 50 percent from what they received last year for the last two months of 2009. The new salaries will be the base for Feinberg to make pay determinations for 2010. Cash pay would be cut by an average of 90 percent, with some of the lost pay replaced by stock grants that executives would have to hold for up to four years. Such restricted stock is believed to reduce the incentive for risky short-term decisions. That sounds like a good, performance-based plan. Critics of the proposal said it will create a brain drain for those companies, prompting the workers involved to go elsewhere where they can make bigger money without restriction. That may happen with some, but I don't think we will see a giant march out the doors of these companies. Sure, money's important. But I don't think that big money is the only thing that motivates people. If money was the only consideration, nobody would ever work in government these days. Or in journalism. Or in any number of careers where the pay isn't huge. The world is full of examples where people have excelled at their jobs for any number of reasons, like the challenge of proving they can be the best. Sometimes, they want to make the world a better place. Sometimes receiving a simple thank you from the boss (or millions of taxpayers) is enough. When I think of the kind of person who can be motivated solely by the biggest paycheck, I think of the man or woman, or the group of men and women, who came up with the idea to create financial securities out of pieces of mortgages. That single idea created billions of dollars for people. It also got mortgages so complicated that it left people without a clue who actually owned theirs. And it triggered our current, terrible recession. If those are the kinds of minds we might lose from the seven bailout companies, I have just one thing to say: Good riddance. Mike Benbow: 425-339-3459, benbow@heraldnet.com. READER COMMENTS Be the first to comment. You must be a registered user and verify your e-mail address to post comments to blogs or articles on HeraldNet. To register, click here. To read other terms and conditions, click here. Log out

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