Ethics of Executive Compensation Hot Topic in Post-Election Washington
Nov 10th, 2008 • Posted in: NewsIt’s news in Europe, too, with several nations considering caps on salaries
WASHINGTON and LONDON
In the combined aftermath of the U.S. election and the worldwide economic implosion, executive compensation is back on the ethics radar.
TheStreet.com reports that president-elect Barack Obama appears poised to endorse the concept of clamping down on excessive CEO pay, and quotes CtW Investment Group director Michael Garland as predicting that the time is ripe “to push for more meaningful reform.”
“People are disgusted not only by the level of pay,” Garland says, “but also by the perverse incentives that our current pay system has fostered.”
CNN notes that there is growing opposition to big Wall Street bonuses on both sides of the aisle. Republican and Democratic lawmakers have put several banks and securities firms that received government bailout funds on notice that the rescue money should not be used to pay bonuses.
But in an opinion piece published in Crain’s New York Business, editorial director Greg David argues that slashing bonuses could be both unfair and counterproductive to the economy. “True, Wall Streeters make more than just about anyone else — an average of $360,000 in recent years. But there are some economic facts of life that need to be recognized…. People in the securities industry don’t get almost equal installments each month with a small added dollop of cash at the end of the year. Their monthly checks are small, with their contingent compensation, usually paid out early in the year, accounting for half and sometimes two-thirds of their take-home pay. Eliminating their bonuses is not like skipping other people’s.”
The Financial Times notes that excessive executive pay has become a hot topic in some parts of Europe. In France, president Nicolas Sarkozy has imposed legislation forcing the head of a firm that accepted a government bailout to forfeit his golden parachute. Measures to cap executive pay also are under consideration in Germany, the Netherlands, Sweden, and the United Kingdom, according to the Financial Times.
Sources: TheStreet.com, Nov. 7 — Financial Times, Nov. 4 — CNN, Nov. 4 — Crain’s New York Business, Nov. 4.
For more information, see: Related Newsline story, Oct. 20 — Related Newsline story, Oct. 14 — Related Newsline story, Oct. 6 — Related Newsline story, Sep. 29 — Related Newsline story, Sep. 22.
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