Cap on Executive Salaries and bonuses.

Caps on executive salaries

I see where Congress is trying to impose limits on Wall Street Executive salaries. If they go about it correctly it might be a good idea. If they do it heavy-handedly the cries of socialism will start to ring true. In the ideal world the companies and executives would make these changes without government intervention. I have two suggestions about how this should work. Both of these have been mentioned in earlier posts but I see the need to revisit them.

First, I would like to see a rule limiting any executive’s total compensation to no more than 5 times the average salary of all the company employees. This would help (in theory at least) raise the incomes of all employees. As a working class employee all my life I find it hard to forget that my co-workers and I carry the weight of the executives. They have the education, talent, and personalities to make the million-dollar decisions and I understand that. Still, someone has to tighten the screws and sweep the floors. I have had a hard time in the past being sure MBA didn’t mean” Must Be an Asshole” or “Master of Being Abusive” instead of the accepted meaning. Increasing a company’s profits by limiting wages just to get a large profit-based bonus at the end of the year seems abusive to the workers. Sure, we don’t want to be responsible for the decisions; in a large part because we might have a different point of view.

The economy is not powered by high priced executives; ultimately it is powered by consumers. $25 more disposable money in the hands of 50,000 families has more impact than $1,250,000 divided among 10 top executives. Stockholders expect a few cents per share income on the 100,000(or so) shares they each own. That is capitalism and I have no problem with it. You cannot convince me that paying out multimillions total in bonuses does not impact the stock dividend. If I were an executive I might forego a larger dividend in order to receive a million dollar bonus atop my $750,000 salary.

My second idea for executive compensation is a totally different approach for rewarding top people for extraordinary success. I realize that people who have the personality to make the good business decisions expect to be recognized and rewarded for their success. I also believe there is a rational limit for the personal wealth any person actually needs. There is a point where additional income simply becomes superfluous. If too large a portion of a country’s capital is removed from the groups with the most impact on the economy the economy will suffer. An executive with a personal wealth in excess of $30Million (or another arbitrary figure) doesn’t really need a million-dollar bonus. He should be rewarded for his successes of course. I propose the board of the company (any company) determine what his contribution to the company is worth then publically donate the amount to charity in the executive’s name. A public announcement of the donation and public recognition of the executive’s efforts would be more personally rewarding than another big bonus to hide from the IRS.

I would love to see a full-page ad in the WSJ saying that St Jude Children’s Research Hospital just received a million dollar donation in my name from my company. Public appreciation of this type might be incentive for others.

I realize republican politicians with rich backers will have to label my ideas communist or socialist. I am not a communist or socialist and your opinion of me is inconsequential.

DRP