Caps on executive pay are immoral and idiotic. I think Obama is smart enough not to pursue them (some of those Dem congresspeople though . . . I’m not so sure).
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I would never want to see the government step in to impose a salary cap. That is far too intrusive an action and would lead to even more intrusive actions regarding the management of companies in future years.
I do think that a cap should be set (following a serious cut to current salaries), but it will need to come from the stockholders and the boards of directors. Currently, the payment of CxOs is the result of a mish-mash of incestuous boards of directors–often comprising CEOs, themselves, who do not wish to impose a limit on their fellow managers in fear that their own compensation will be cut–as enabled by large investors such as institutions, (e.g., insurance companies), who have grown so large that their investments are farmed out to departments or even outside companies who have no stake in the quality of the companies in which they invest.
The boards have fallen for their own hype or propaganda that they need to pay far above top dollar to get the best talent, and who then pay above top dollar to mediocre (or poor) performers who have obtained a reputation for quality simply by demanding more money. Even U.S. business has recognized that problem for years. Fortune Magazine devoted an entire issue to the situation in their June 25, 2001 issue, including this article. (One of the articles in that issue, that appears to not be on-line in the archives, was a roll call of CEOs that had trashed their companies while receiving bonuses–a situation that has hardly changed in the ensuing seven years.)
CxOs of major corporations are seriously overpaid in the U.S., but inviting the government to “fix” the problem is liable to create more problems than it solves. If the government has to be involved, let it be through some sort of modification to corporate oversight rather than direct (and foolish) intervention in compensation.
The Commerce Clause is used by the federal government to justify poking their noses into everything.
Back in 2005, the SCOTUS ruled that the federal government had the right to arrest a woman for doing something legal in her state but illegal to the federal government. The decision said (paraphrasing) that because the marijuana she was growing might be harvested illegally by someone else, and then it might be transported and sold in another state, the feds had jurisdiction under the CC.
As Justice Thomas noted in his dissent
I know this case well, as it was the first thing I ever posted about on the SDMB, specifically to ask how in the world this decision was justified. Bricker and a few others came along in short order and 'splained me, and now I get to 'splain myself!
Do you think that any type of pay cap is immoral and idiotic, or just caps on executive pay?
Sure they could, up until this new legislation was passed in 2005, and frequently they did.
There was nothing unconstitutional about not capping compensation during bankruptcy before 2005, and there appears to be nothing unconstitutional about capping compensation during bankruptcy now. I don’t see at all how the constitutionality of such laws would be dependent on the company’s filing for bankruptcy.
And what about the wage freezes imposed under previous Presidents, e.g., Nixon, or by state or municipal governments during budget crunches? Have any of those ever been found unconstitutional? Not that I’m aware of.
In fact, it seems to me that the courts have been pretty generally willing to admit the government’s right to set wage levels if it wants, though of course this doesn’t often actually happen because it’s generally very inefficient. Are you looking to any particular legal precedent as the basis of your claim that federal legislation setting executive pay caps would be unconstitutional?
Any type of pay cap.
Cite where a bankruptcy court would allow a golden parachute ahead of creditors.
That was a temporary measure due to an economic crisis and it failed miserably which would lend credence to any lawsuit brought against such a measure.
More like, “Greedy bastard, we bailed your ass out to the tune of billions. If you’re going to squander it, you’re paying full price on the taxes.”
We’d certainly want to allow some level of reward for risk. However, many of us have to make do with the reward for still having a job. The problem with this kind of risk is that the CEO, given a large payback, risks the company’s money long term, not his own. That’s why the clawback proposal is appealing - someone can come and yank the money back if the risk blows up in his face. Isn’t that fair?
As for shareholders - please propose a method with which shareholders will have an active voice in governance. There are so many of them that they are going to be hard to organize, and so much of our shares are held by mutual funds, which are not long term investors in any company. Plus, how many slates of directors run in corporate elections? It’s a democracy in the same sense Cuba is.
Here is an opinion piece from that Marxist publication *Business Week * on this. It notes, and I’ve seen this before, is that the way to do it is to limit the current tax deduction for executive salaries. Or, you could increase the tax on a business on salaries above a certain level. High pay would still be allowed, but it would be very expensive for the company, and eventually the sheep ^h^h^h stockholders would complain. It seems that stockholders at the moment have very little ability to rein in pay except by firing the board or by - maybe - a stockholder motion, neither of which is likely to happen.
Or the business could relocate to another country. The problem with dictating terms to the holder of the ball is that they might just move the game somewhere else. This is nothing but commune mentality and it doesn’t work. It’s none of the government’s business what businesses pay their employees.
You’re suggesting a course of action that has no basis of measurement other than to pull a number out of thin air and declare it fair. If this were to take effect then other politicians will follow who think the number pulled out of their ass is more fair. Eventually someone will come along and decide you are a greedy bastard who needs to spread the wealth.
Many of the more civilized countries have pay limits already, it seems. The linked article notes that shareholder rights are stronger in England, and the delta between executive pay and worker pay is much lower in Japan, though I don’t know if that is by law or by executives being ashamed at being greedy.
The reason government might get involved is that it appears the current system is a contributing factor to the risk taking that led to the meltdown which is costing all of us lots of money. There is a quiet conspiracy among compensation committees to drive executive pay up. Remember, pay comes from somewhere - in essence it is taking from profitability which drives stockholder value. Surely you agree that a CEO siphoning money out of a publicly owned company is committing a crime. That’s what is happening here, in essence.
It would be nice if we could define guidelines where CEOs get paid based on real and continuing value to the owners. That seems to be too difficult, and likely too full of loopholes, so a multiplier for worker salaries seems reasonable. The CEO is not the investor, and workers contribute to stockholder value also. If it zooms up high enough for the CEO to get a giant payday, why not the workers also? If the worker feels underpaid he can leave, ditto the CEO with no doubt much less pain.
Personally, I believe we all need to take a hard look at the consequences of exporting jobs.
General morale?
Most CEO’s aren’t Superman; they know it, the board members know it, and Joe the Maildelivery Boy knows it. They know that while a COE is more qualified then Joe, all know the difference isn’t times 100. The (corporate) world doesnt become a better place when there’s Ubermenschen and diposabel folk.
Loss of being grounded in the real world. If you pay the CEO a Superman wage, he just might think that he can put on a red cape and fly.
Another reason; a paycheck quiclu becomes a status symbol among CEO’s in their crcle of CEO’s. And like with any status symbol, people go to ridiculous lenghts to outdo one another. Somebody, something, somewhere, has to cap it, for the peace of mind in CEO-land if nothing else.
The Netherlands saw the “Code Tabaksblat” about five years ago, a guideline for CEO salaries. It is still being evaluated. For the time being, is is just as suggestion, non binding. Here’s the link to the Dutch Wikipedia Page, translated throught Babelfish:
http://babelfish.yahoo.com/translate_url?doit=done&tt=url&intl=1&fr=bf-home&trurl=http%3A%2F%2Fnl.wikipedia.org%2Fwiki%2FCode-Tabaksblat&lp=nl_en&btnTrUrl=Translate
I’ll translate the essence for you:
? I didn’t say that a bankruptcy court would necessarily allow golden parachutes under all circumstances, I said that a company might expect them, and that there would be nothing unconstitutional about laws permitting it or not permitting it.
An example of such an expectation (and a general claim about such expectations frequently being fulfilled) is provided right there in my linked article:
No argument about the practical flaws in wage-freeze regulations, but again, where are you getting the idea that it, or similar legislation capping executive salaries, would therefore be unconstitutional? AFAICT, it was not found unconstitutional back when it was actually in effect, so why would we expect it to be found so now?
You don’t seem to have any actual support to offer for your assertions that salary-cap legislation would be unconstitutional. Your criticisms seem to boil down to the fact that you think salary caps would be unfair and unworkable.
And I’m not arguing with that assessment. I’m just pointing out that the fairness and practicality of legislation doesn’t necessarily have anything to do with whether it’s constitutional.
Isn’t that an issue for the owners of the company to address?
And if you think pay caps are OK, wouldn’t that apply to pro athletes and movie stars? “Sorry, Harrison Ford, the government only allows us to pay you $450,000 to act in our movie. Now sign here.”
In the Netherlands the “Prime Minister Standard” has been effective since 2005. Our President’s salary is about 160.000 euro’s a year. While it is understood that CEO’s of, say, the National Bank, have a higher salary, any CEO of a institution that is primarily financed with tax money is required by law to publicize every year, the names and exact salaries of any CEO’s that make more money then our President.
The aim of the law is “naming and shaming”. It is becoming a bit of a tradition to have a public outcry at top salaries in such public institutions. For instance, when the salary of the CEO of a cancer research institute became public knowledge, the donations dropped considerably.
Non publicly funded institutions, however, are exempt from the Prime Minister Standard. As are our top athletes, for instance our soccer players, which have a status and wages comparable to star league players in the US.
I’m am very much against a Government mandated salary cap, It’s unconstituitional.
Personally I figure fight scum with scum, pit em against lawyers 
Make a new Stockholders bill of rights, in which the CEO of any stock distributing company takes an official oath to work in the interests of the company. Then use a vast new set of Executive Malpractise and Malfeasence laws to enforce the oath. If you screw over a company and it’s stockholders not only do you not get a Parachute, you get kicked out the plane stripped of any penny you have ever earned. A good CEO can still make hundreds of millions, but before he takes any stupid risk, he’ll realize the severe consequences of raping the profit books now.
Oh goodness, here’s another of you. Can you do any better than Magiver in explaining exactly what legal grounds you have for asserting that a salary-cap law would be unconstitutional?
Remember, the federal legislature has maintained minimum-wage laws for decades, and although many people don’t like them, they have never been found unconstitutional. Nor, AFAICT, has any other government-imposed regulation of pay levels. What specific basis in constitutional law can you adduce for your claim that it would not be constitutional to impose a maximum-wage law?
“Unconstitutional” has a very specific meaning in terms of jurisprudence. It can’t be used just as shorthand for the sentiment “I don’t like it and I think it would be unfair.”