Thursday, February 05, 2009

Wall Street responds to Obama plan.

President Obama has decided arbitrarily that if a company gets a Bailout from the Feds, that the executive pay must be limited to $500,000. To some people, that sounds darned fair right? 

Here be the rub. The best know how good they are, and what they are worth. Take a Hollywood star for example. Do you think that Christian Bale would agree to do a movie if all he would be paid is $500,000? The obvious answer, no. So you find another actor right? Even if that actor doesn't do as good a job, and even if the movie doesn't do as well because of it right? 

That is the problem. Let's say that you are an executive who has just finished turning a company around, and making it profitable. You're interested in another challenge, and you're currently earning $25 Million a year. Bank of America comes to you and asks if you'd be interested in helping them get turned around and back to profitable. You say sure, you'd be interested. B of A is a bigger company, and you know that the pay would be equally larger. Then you find out your pay is limited by Congress to half a million, or 1/50th of what you are making right now. Do you take the job? Obvious answer, not no, but hell no. 

So who do they get to run these companies? Obviously they're not going to get the best and the brightest. Obviously they're not going to get those that are only considered good, they're making more than a million a year right now. 

Capitalism means you get what you can make. You take what the market will pay. If you're worth a million dollars to one company, how big of a dolt do you have to be to take a fifty percent pay cut? Why should they? Not patriotism certainly. Aren't they helping the economy just as much by staying where they are, and keeping the company they currently run profitable and keeping the people there employed? 

So why would President Obama decide on this arbitrary number if he is really determined to save the private economy? Obvious answer, he isn't determined to save the corporations as private entities. He is obviously taking this action to make sure that no one would touch the jobs, no one who would have a chance of saving the companies. 

In other words, the only reason I can see for taking this action is to make the jobs of leading those companies as unattractive as possible for the best Executives in the world. Huge risk, and a tremendous amount of work, for a small percentage of the pay they are currently getting? There is a old saying, about things being more trouble than they are worth. 

So if we can't get the best and brightest for the jobs, what will happen? The companies won't get turned around, they won't get salvaged, and they won't become profitable. They will become Federally owned, socialized companies, run by Congress and political appointees. In other words, Bank of America is about to become the next Fannie Mae, where appointee's who are in good with the Political Party in power get the jobs, instead of the most qualified and best suited for the job. 

Liberals, give them a chance, and they'll screw it up. 


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