# No bailout exec can earn more than $500,000. Good idea? **URL:** \ **Category:** Great Debates\ **Created:** [February 4, 2009, 2:53pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413 "2009-02-04T14:53:23Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [February 5, 2009, 3:08am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/81 "2009-02-05T03:08:08Z")
Merill gives bonuses in Jan. Last year they paid out approx. 4 bill in bonuses in December. They were being taken over by Bank of America in Jan and were getting bailout money. They lost 21 bill the last quarter. But slipped in 4 billion in bonuses before the take over. Yep ,theses are the guys we need running the banks. They are irreplaceable since Willie Sutton and Dillinger are dead. They are not banking geniuses. They are thieves. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [February 5, 2009, 3:19am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/82 "2009-02-05T03:19:51Z")
> [@Whack-a-Mole](#): > > I am just waiting for the fat cats to find the loopholes in these regulations. I have no idea what those loop holes might be but you can bet your bottom dollar they exist and these guys will find them and end-run around the whole thing. Yessir. There are ways, Dude, there are ways [/Walter Sobchak]. There are whole teams of lawyers with “Executive Compensatin” or “Employee Benefits” under their names that are ready willing and able to figure a workaround for any of this. ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [February 5, 2009, 3:22am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/83 "2009-02-05T03:22:30Z")
Also, a lot of you are using really loose language. No one has been “given” bailout money, no funds were “distributed.” What \*has \*happened is that companies have been given low-interest loans or have sold preferred stock. Now, there is a bailout (i.e., “free money”) component of a low-interest loan, but the full face amount of the loan is not a handout. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [February 5, 2009, 3:36am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/84 "2009-02-05T03:36:35Z")
> [@](#): > > SOME of them did. Others did not. Unless you are under the impression that the only ones at fault were those who got voted out…or that this entire mess was Bush’s fault and now that he’s gone everything is cool. No, not every politician who was voted out was responsible for our financial problems and not every politician who had responsibility was voted out. But there was some correlation. Which is reasonable. People talk about risk all the time but they somehow seem to think there shouldn’t be consequences. People deserve to benefit from making good decisions but they also should accept penalties for making bad decisions. I think a lot of this economic crisis was caused by the realization by executives that they would collect the rewards if they made money but the government would step in and bail them out if they failed - this is a system that guarantees executives will take foolish risks. Cutting back executive salaries from $5,000,000 a year to $500,000 a year might be the incentive for future executives to think harder about their decisions. > [@](#): > > YMMV…I very much think this is a loony lefty meme, though it’s got some traction these days with as frustrated and worried as people are. As for American salaries being out of line with the rest of the world…well, so what? American SALARIES are somewhat out of line with those of the majority of the world. American sports athletes salaries are out of line of those of most of the rest of the world as well. Our salaries are what they are and I’m not too keen on the government sticking their thumb into this issue to ‘fix’ it based on…well, based on gods know what. Feelings. Emotions. Dart boards. Polls. If professional sports were creating a national crisis and the government had to step in, then I would support government control of salaries. As I’ve said before, I can accept foolish decisions that are self-supporting but not when it’s my money being used to pay for them. Consider this - say that Best Buy had decided to bail out Circuit City instead of letting it go bankrupt. And one of the conditions of Best Buy’s bailout was that Circuit City had to cut some of its more unreasonable expenses. Would anyone argue that Best Buy was obligated to continue paying all of Circuit City’s expenses at the same level they had been at before the bailout? Of course not. Best Buy was putting up the money and setting the terms, and Circuit City would have had to accept those terms if they wanted the money. Now we are the bailout suppliers so we get to set the terms. If businesses wnat our money then they have to accept our terms. There’s nothing abnormal or looney or leftist about this. It’s a standard business practice when new money comes into the company - it comes with conditions. It’s just that the executives are hoping they can convince us that they’re somehow owed the money and we’re supposed to supply it with no strings attached. > [@](#): > > So, you are deriving some benefit out of helping him out, yes? So, if I tell him ‘I’ll help you out but from now on you can’t smoke anymore inside’, then you don’t feel that is somewhat hypocritical since I HAVE to help him? Since I’m pretty much going to insist on it in fact? It’s called having a strong negotiating position. Sure, it’s in both our interests to have the fire extinguished so we’re going to work together on that. But he wants the fire out now before his garage catches fire and I want him to accept some basic rules of fire safety. This is the area where we negotiate. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [February 5, 2009, 5:33am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/85 "2009-02-05T05:33:36Z")
Unintended consequences will abound. This is a stupid idea, that has one benefit - it will give ‘bailout’ companies a big incentive to pay back the money and get the government off their necks, which is a good thing. But in the meantime… We really have no idea what kind of damage this will do, and neither does the government. Consider a large corporation. They have an engineering office where the engineers make $120,000 per year, and the engineering manager maybe makes $175,000. That means the regional manager is probably making $225,000 or more, and the president of the division might be making $350,000. According to [salary.com](http://salary.com), the top 10% of division heads make on average $417,000. Then you get up to head office, and you have a bunch of Vice Presidents, the COO, and others who are already making well in excess of $500,000. Exactly who is going to step up and take a cut in pay and put up with all the hassles and public recriminations to become CEO if the current one leaves? Or maybe you need to attract a great CEO to save your company. Average compensation for CEOs in the fortune 500 last year was 6.1 million dollars. Are any of these guys going to come work for you for less than 1/10 of their current salary? For that matter, let’s say you’re a division exec, and a damned good one. But your CEO has screwed the pooch, and now the company is operating under a bailout. But you’re a high-quality, hard-charging type who wants to move up the ladder. Where is your resume going? To the head office? Or down the road to the competitors? What this could wind up doing is ensuring that the bailout companies, the ones who need the best management, could wind up being managed by the second string while everyone else looks for greener pastures. I can see another possible unintended consequence - market confidence. If the CEO leaves one of these companies, and the only person they can find to replace him is a middle manager with a so-so reputation, what will that do to the share price? But the real problems will probably occur in ways none of us can imagine right now. That’s why they are unintended consequences - they can’t be predicted. Governments have to stop making these meaningless populist gestures when they really have no idea what effect they’ll have on the marketplace. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [February 5, 2009, 6:05am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/86 "2009-02-05T06:05:05Z")
You’re missing a big point. These guys aren’t at the top of their field. This is like Matt Millen going to William Ford last December and insisting he gets a raise or he walks. These guys don’t deserve $6,100,000 salaries. They probably don’t deserve $500,000 salaries but we’ll be charitable. But if they start acting entitled we should tell them the door’s that way and we can find hire a chimp to sit in your chair and he’ll probably get better results than you did last year. ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [February 5, 2009, 6:21am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/87 "2009-02-05T06:21:48Z")
> [@](#): > > But in the meantime… We really have no idea what kind of damage this will do, and neither does the government. OK, granted, we don’t know exactly what this will do. But we _do_ know what _not_ doing it will do, since that’s what got us into this mess. I think it’d be pretty hard for the consequences of doing this to be worse than the consequences of not doing it. ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [February 5, 2009, 7:02am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/88 "2009-02-05T07:02:13Z")
**Sam** , a number of execs, when they’ve taken the helm of a large corporation that’s in trouble, have taken a salary of $1/yr. Lee Iacocca being the most famous example. Look at it this way: You have to have a very delicate, life saving operation, there are two qualified surgeons who can do the operation. One became a doctor simply because he knew he could make a big paycheck. The other went into medicine because, more than anything, he wanted to save people’s lives. Who do you choose, all other things being equal? Me? I’m going for the guy who wants to save lives. Maybe I’ll live, maybe I’ll die, but I figure the guy who’s **not** in it for the paycheck is going to work a bit harder at keeping me alive while I’m under the knife, and that just might make the difference. ---
**Author:** ![Der\_Trihs](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/der_trihs/32/233_2.png) [@Der\_Trihs](https://boards.straightdope.com/u/Der_Trihs)\ **Post date:** [February 5, 2009, 8:01am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/89 "2009-02-05T08:01:27Z")
> [@Martin\_Hyde](#): > > Do you guys on the left genuinely believe **every** CEO is a fat cat moron who brings no value to their company and could be replaced on a whim? Probably not all, but the great majority yes. IMHO, the main functions of the typical CEO are to rake in bonuses, hand out more to the Board of Directors and take credit for the accomplishments of others. A parasite. > [@xtisme](#): > > Serious question then…why aren’t they being hired NOW? Why weren’t they being hired to fill these positions for the last year? I mean, if these guys are as qualified AND they are willing to work for so much less than these worthless CEO’s then why aren’t companies (ever mindful of the bottom line) dumping high priced executives and going with better and cheaper replacements? They probably aren’t buddies with the Board of Directors, or a Board member themselves. Who you know is more important than how good you are. Like **clairobscur** was saying, what we have here is an incestuous managerial class that keeps appointing each other to high positions and handing each other bonuses. > [@xtisme](#): > > YMMV…I very much think this is a loony lefty meme, though it’s got some traction these days with as frustrated and worried as people are. I expect that’s because you live in the right wing hothouse of America, where even moderate leftism is nearly unknown. Therefore even moderate ideas look loony and far left to you, rather like letting women vote would look extreme to a medieval peasant. > [@Tuckerfan](#): > > Its pretty rare for a person to be on the board of just one company. Also, the shitheads who run a company into the ground often do **not** have any trouble leaping from one failed company to another. Why anyone would hire someone who ran a company into the ground to manage theirs is a mystery to me, but it happens all the time. Because they are all doing it for each other. ---
**Author:** ![tagos](https://avatars.discourse-cdn.com/v4/letter/t/bbe5ce/32.png) [@tagos](https://boards.straightdope.com/u/tagos)\ **Post date:** [February 5, 2009, 9:43am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/90 "2009-02-05T09:43:42Z")
> [@Martin\_Hyde](#): > > What I find distressing about this thread is people seem wholly incapable of extracting rage from their logic. That’s a terrible way to make decisions. > > Do you guys on the left genuinely believe **every** CEO is a fat cat moron who brings no value to their company and could be replaced on a whim? Yes. The facts speak for themselves in the hundreds of billions. Incompetents or crooks. There are no other options. ---
**Author:** ![MichaelQReilly](https://avatars.discourse-cdn.com/v4/letter/m/df705f/32.png) [@MichaelQReilly](https://boards.straightdope.com/u/MichaelQReilly)\ **Post date:** [February 5, 2009, 3:13pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/91 "2009-02-05T15:13:04Z")
> [@clairobscur](#): > > And obviously we didn’t have the best minds heading the companies, since they’re in trouble. So, the process that put them at this place for this salary failed. Why should I assume that it’s the best system? The issues with it (inbreed CEOs sitting in each other boards and approving each other raises, for instance) are known, and have been known and discussed long before the current crisis. Why should I believe it will work better in the future? What an incompetent tool could do that would be worst than bankrupting the company, or in the case of Iceland, the whole country? > I’m perfectly willing to look out of the aforementioned current inbred pool of CEOs for people willing to work for the paltry sum of $500 000, and would feel perfectly justified to have a say in the matter if my taxes had been used to keep the company afloat. > And I don’t believe for an instant that something remotely similar to the invisible hand of the free market is at work when we’re talking about the CEOs of major international corporations, their selection, and their salary, anyway. We’re not talking about shoes retailers, here. Well said. ---
**Author:** ![Sitnam](https://avatars.discourse-cdn.com/v4/letter/s/6a8cbe/32.png) [@Sitnam](https://boards.straightdope.com/u/Sitnam)\ **Post date:** [February 5, 2009, 3:18pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/92 "2009-02-05T15:18:44Z")
> [@Skald\_the\_Rhymer](#): > > That is hardly President Obama’s fault. He was not in charge when the first round of funds were disbursed. Well, not ALL his fault. He was a Senator when he voted for it, he also bent over backwards to get it through as fast as possible. He obviously didn’t have free reign to put in the restrictions needed, but he certainly held his nose and voted for it as is. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 5, 2009, 4:06pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/93 "2009-02-05T16:06:45Z")
> [@Sam\_Stone](#): > > Unintended consequences will abound. This is a stupid idea, that has one benefit - it will give ‘bailout’ companies a big incentive to pay back the money and get the government off their necks, which is a good thing. > > But in the meantime… We really have no idea what kind of damage this will do, and neither does the government. > > … > But the real problems will probably occur in ways none of us can imagine right now. That’s why they are unintended consequences - they can’t be predicted. Governments have to stop making these meaningless populist gestures when they really have no idea what effect they’ll have on the marketplace. You can’t have it both ways. These bailouts are a gift from the government that basically lets the receiving company keeps their doors open a little longer. Even I think it’s asinine for those companies to then turn around and pay themselves $18 billion in bonuses. Bonus for what? Not making any money? Making poor investment decisions? They are lucky even to have jobs at all. These people are clever. If they want to compensate a top rate CEO, tie his future compensation to the success of the company after he turns it around. Paying the same morons who almost ran the company into the ground sounds like entitlement and looting to me. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [February 5, 2009, 4:56pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/94 "2009-02-05T16:56:20Z")
[QUOTE=Der Trihs] I expect that’s because you live in the right wing hothouse of America, where even moderate leftism is nearly unknown. Therefore even moderate ideas look loony and far left to you, rather like letting women vote would look extreme to a medieval peasant. [/QUOTE] The fact that you think I’m a right winger pretty much says it all. 😛 -XT ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [February 5, 2009, 5:16pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/95 "2009-02-05T17:16:54Z")
Well, you’re way to the right of me, and I’m a centrist. OK, maybe I lean a wee bit leftish. Just a smidge. ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [February 5, 2009, 5:25pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/96 "2009-02-05T17:25:19Z")
> [@Sam\_Stone](#): > > Or maybe you need to attract a great CEO to save your company. Average compensation for CEOs in the fortune 500 last year was 6.1 million dollars. Are any of these guys going to come work for you for less than 1/10 of their current salary? In my opinion, there are very VERY few “great” CEO’s around who can turn a company around. We can probably list them on one hand. Many of the overpaid CEO’s actually do very little to improve a companies fortunes. Just in case you think that I’m right out to lunch here, others do agree: [Low CEO salary tied to company success](http://austinpreneur.com/2008/09/low-ceo-salary.html) Here’s a study that showed that despite recent improvements, there is " a disturbing **inverse relationship** between the absolute dollars of CEO total direct compensation received and firm performance. " [Study](http://www.thefreelibrary.com/DolmatConnell+Study+Finds+CEO+Pay+Trends+Better+Linked+to+Financial+...-a0147512697) ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [February 5, 2009, 6:05pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/97 "2009-02-05T18:05:58Z")
I am sympathetic to the concern about unintended consequences. However, I don’t think it’s enough simply to say that, given optimal market conditions, a board would replace the CEO if there were someone qualified who would accept less salary. We cannot blithely assume that in the midst of the terrible economic management at these firms that the boards were nevertheless being perfectly rational with their CEO compensation. Why should we expect them to accurately assess the talent of a CEO when they cannot accurately assess the risk of lending money to a person with no income or assets? In short, opponents of the cap should not be resting their arguments on the economic acumen of the boards of failed firms. It seems at least plausible to me that boards might have merely assumed they need to pay millions in CEO compensation, like the firms assumed that housing prices would always rise, and like they assumed that credit ratings were always accurate. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [February 5, 2009, 6:16pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/98 "2009-02-05T18:16:26Z")
Don’t bail them out then instead of attempting to ‘fix’ the problem by use of caps. If they use bad practices then let them fail…otherwise they are just going to keep doing the same things. As others pointed out, one of the unintended consequences here is that, while you might be able to set such a cap, there are OTHER things that will be used as compensation that won’t be covered by this cap. If the government keeps propping up businesses who have such obvious flaws in their practices (obvious to everyone here on the SD of course) then the simple answer here is…don’t keep propping them up and encouraging such bad behavior. If there are legions of fresh faced and competent (while dirt cheap) executives out there who would obviously be better than those schlubs currently in charge of these corporations then by not bailing these folks out you will force the new companies formed from the ruins of the old one’s to rethink this and other things, and perhaps help them to evolve into more socially acceptable (on the 'dope) businesses with a much more egalitarian outlook. -XT ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [February 5, 2009, 6:19pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/99 "2009-02-05T18:19:52Z")
Of course we would prefer, in the absence of some other compelling reason, for bad businesses to fail for the reasons that you state and many more. The judgment here was that if you let the core of the financial industry fail, the whole economy tumbles down and we’re stuck in a severe Depression. Maybe that is an incorrect judgment. I don’t think I have the economic background the second-guess. But it is a judgment that depends on a great many factors not considered in your post. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [February 5, 2009, 6:24pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/100 "2009-02-05T18:24:16Z")
> [@xtisme](#): > > … (obvious to everyone here on the SD of course)… (on the 'dope) … > > -XT Nicely done! A drop of innuendo, and a wee dram of implication. So, its only we crazy lefties here on the Dope who see this as a problem? I had no idea we had such influence! (Not a big hairy ass deal, or anything, **XT**. Just couldn’t let you think you could get away with it…) [Previous page](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413.md?page=4) [Next page](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413.md?page=6)