# 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:** 7
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 6, 2009, 3:03am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/121 "2009-02-06T03:03:46Z")
> [@gonzomax](#): > > Buffet who has dealt with these geniuses for years, says corporate chiefs are the heads of fraternities who know how to backslap and play golf. People pleasers who get there by social skills ,not financial talent. You know, I think it depends on the company. Lee Iacocca, Jack Welsh, Mike Bloomberg, Bill Gates, Michael Dell and Steve Jobs are well respected CEOs. On the other hand, the senior mangement at my last job were essentially a bunch of talentless frat guys who happened to get into an industry as it was taking off. There’s nothing particularly brilliant about most of them. They promote based on who their drinking buddies are and that’s basically it. Basically, new businesses require dynamic geniuses. As the businesses get bigger, they become slower and more beurocratic. In a mature industry with little outside competition, just about any idiot can be the CEO. The business more or less runs itself at that point. ---
**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 6, 2009, 3:47am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/122 "2009-02-06T03:47:23Z")
> [@](#): > > 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. You don’t throw the baby out with the bath water. We don’t want our entire economy to go under. As the cliche goes, some companies are too big to be allowed to fail (which is a whole other issue we should probably be thinking about). You can’t stand aside and watch these executives receive the full consequences of their poor decisions because those full consequences would have too much collateral damage. > [@](#): > > Then it’s a bad idea to attempt this kind of political grandstanding over this issue IMHO. If we HAVE to bail these folks out because they are so key to our economy that if they fail we are all doomed then attempting to set these kinds of limits for the sole reason of scoring political points or throwing bones to the base is counter productive. You could set a $1 limit on executive salaries and it would change nothing in the long run. The contention of many in this thread is that these executives are worthless or worse, that there are hordes of cheaper band better executives out there just waiting to be GIVEN the chance, etc etc. Well, that ain’t gona happen with this initiative and the only thing it will achieve is to make some folks feel smug that they have stuck it to The Man…while causing other consequences we can’t really predict. Part of fixing the problem is fixing the problem. There’s no point in giving these businesses money if they’re just going to jump off the same cliff again. They failed - obviously they made mistakes and they need to change something. Cutting exorbitant executive salaries is one of those changes. But don’t build a strawman. Who’s saying these executives are “worthless or worse”? The proposal on the table is that they get an annual salary of $500,000. By that standard, we’re apparently saying that they’re worth more than everyone in this thread combined. A six-figure income is hardly the equivalent of the guillotine. Hell, I’d consider it an honor if somebody said my job performance was worth half a million dollars and you wouldn’t see me threatening to switch jobs over the insult. > [@](#): > > My point is that this pay cap isn’t going to REALLY do much except score political points and make some people feel good. All that will happen is that CEO’s who would fall under this cap will be compensated in other ways…probably through stock or maybe through other perks not addressed by the cap. The fact that the companies will be bailed out will do nothing to curb this supposed excess of CEO salaries in the future, since despite failing their companies will be bailed out at tax payer expense. > > While I’m sure that some of these CEO’s and their boards ARE a bunch of bozos (and probably highly overpaid as well), I seriously doubt that the majority of them are. Most of them just got caught on the cliff when the footing went away. It’s easy to look back with hindsight and see what many of these companies SHOULD have done…but then it’s easy to do that for each and every economic downturn through the entire history of the country. When the government sets up the environment it’s hard to blame business people or corporations for taking advantage of that environment if there is a lot of money to be made…and it’s hard to predict exactly when the bubble will burst or what other things might be effected that weren’t taken into account. It will serve at least one valid purpose. It will link the corporate failure to individual loss. Too many executives appear to gauge success by their personal income - _“The company may have lost billions last year but I got a ten million dollar bonus anyway so it was a good year overall.”_ This proposed cap creates a linkage - when the company takes a loss, the guy in charge takes a loss. > [@](#): > > Well…an alternative explanation might just be that they didn’t really need that money after all and were just playing along in order to get their share of the government tit. If so, I stand corrected. The salary cap proposal will serve two valid purposes. It’ll also separate the companies in real need from those that would just like some free money. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 6, 2009, 4:06am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/123 "2009-02-06T04:06:57Z")
Just out of curiosity, do people think that the CEOs of these investment banks get the bonuses, or do they realize that pretty much everyone in an investment bank gets some sort of bonus? And does that make a difference? ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [February 6, 2009, 4:52am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/124 "2009-02-06T04:52:01Z")
> [@Sam\_Stone](#): > > A modern economy is a lot more like an ecosystem than it is a machine. It doesn’t behave deterministically. There are far too many variables and hidden feedback mechanisms and random events to be able to predict the effects of top-down commands. That’s why government action leads to unintended consequences and usually winds up being counter-productive. Except for tax cuts, which have clear, direct effects that are always positive. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [February 6, 2009, 5:14am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/125 "2009-02-06T05:14:36Z")
Not just by themselves, no, that would be a silly thing to say. But in tandem with a ruinously expensive military adventure, and you’ve got a formula for permanent economic bonanza. And if targets for such adventure should turn scarce, we always have Canada, with the largest known reserves of strategically vital whale blubber. ---
**Author:** ![mswas](https://avatars.discourse-cdn.com/v4/letter/m/e99b99/32.png) [@mswas](https://boards.straightdope.com/u/mswas)\ **Post date:** [February 6, 2009, 5:16am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/126 "2009-02-06T05:16:44Z")
> [@msmith537](#): > > Just out of curiosity, do people think that the CEOs of these investment banks get the bonuses, or do they realize that pretty much everyone in an investment bank gets some sort of bonus? And does that make a difference? No we’re just assuming that the CEO’s is a few million whereas the mailboy’s is a few hundred. ---
**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 6, 2009, 5:32am UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/127 "2009-02-06T05:32:51Z")
> [@](#): > > No we’re just assuming that the CEO’s is a few million whereas the mailboy’s is a few hundred. Exactly. > [@](#): > > In 2007, BB&T Corp. (BBT), which has $152 billion in assets, paid its Chairman and CEO, John Allison 4th, a salary of $965,250 and $2.6 million in bonus and other cash incentives, for total cash compensation of more than $3.5 million. In addition, he received stock awards and options worth $2.7 million…Kevin Kabat, the CEO of (Fifth Third Bancorp Inc.), received a salary of $866,500 and $3 million in other cash incentive compensation… (U.S. Bancorp) Chairman and CEO Richard Davis received a salary of $850,000 and $2.9 million, or 66% of total compensation, in stock awards and options. That ratio was 36% cash compensation to 42.6% stock and option awards a year earlier, because Davis, who was then chief operating officer, received a $1.5 million cash bonus…Bear Stearns’ top executives received $250,000 in salary in 2006, when the mortgage boom was in full swing, but Chief Executive James Cayne received $15 million in restricted stock in addition to his cash bonus of $17 million… In 2007, when the financial crisis first began, Goldman Sachs Group Inc. (GS) Chairman and CEO Lloyd Blankfein earned $600,000 and a $27 million cash bonus - but also $42.4 million in stock awards and options [cite](http://money.cnn.com/news/newsfeeds/articles/djf500/200902051910DOWJONESDJONLINE000798_FORTUNE5.htm) I’m guessing that most of the employees of these businesses did not receive multi-million dollar bonuses. But in the interest of fairness, we’ll set their annual salary at $500,000 so they can experience the same pain their CEO is feeling. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 6, 2009, 2:58pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/128 "2009-02-06T14:58:56Z")
> [@Little\_Nemo](#): > > Exactly.I’m guessing that most of the employees of these businesses did not receive multi-million dollar bonuses. But in the interest of fairness, we’ll set their annual salary at $500,000 so they can experience the same pain their CEO is feeling. Investment banks typically tie a large portion of their employees compensation to their annual bonus. Obviously, the higher up the ladder you are, the more directly you are involved in their core business, and the more successful your group is that year the higher your bonus. Even still, relatively junior associates can make tens or even a few hundred thousand in bonus. The specific problem I have with banks using bailout money for bonuses is that those bonuses are supposed to be contingent on how successful your group was the previous year. Clearly these banks were not successful and it’s not unheard of for bankers to not get bonuses in a bad year. In general, people have a sense of entitlement about their compensation. People still bitch about 2% raises and no bonus when they should be thankful they have a job. If they made $120,000 last year they expect to make $140,000 or more next year. That’s why bailouts don’t work IMHO. The management will just take whatever money they think they are “owed” and not fix any of the problems. ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [February 6, 2009, 3:04pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/129 "2009-02-06T15:04:22Z")
> [@elucidator](#): > > And if targets for such adventure should turn scarce, we always have Canada, with the largest known reserves of strategically vital whale blubber. To paraphrase you, the only way we’ll go after Canada is if we’re attacked by Mexico. ---
**Author:** ![tagos](https://avatars.discourse-cdn.com/v4/letter/t/bbe5ce/32.png) [@tagos](https://boards.straightdope.com/u/tagos)\ **Post date:** [February 6, 2009, 3:05pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/130 "2009-02-06T15:05:44Z")
> [@msmith537](#): > > The specific problem I have with banks using bailout money for bonuses is that those bonuses are supposed to be contingent on how successful your group was the previous year. Clearly these banks were not successful and it’s not unheard of for bankers to not get bonuses in a bad year. These banks have not just had a ‘bad year’. The Bad Year was a culmination of many ‘bad’ years whose true nature was not recognised because assets were not priced correctly. It was all one big illusion at best or more probably a deliberate Exxon style con. That is why every bonus should be repaid. And people imprisoned. ---
**Author:** ![Dangerosa](https://avatars.discourse-cdn.com/v4/letter/d/22d042/32.png) [@Dangerosa](https://boards.straightdope.com/u/Dangerosa)\ **Post date:** [February 6, 2009, 3:13pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/131 "2009-02-06T15:13:16Z")
> [@msmith537](#): > > You know, I think it depends on the company. Lee Iacocca, Jack Welsh, Mike Bloomberg, Bill Gates, Michael Dell and Steve Jobs are well respected CEOs. On the other hand, the senior mangement at my last job were essentially a bunch of talentless frat guys who happened to get into an industry as it was taking off. There’s nothing particularly brilliant about most of them. They promote based on who their drinking buddies are and that’s basically it. Basically, new businesses require dynamic geniuses. As the businesses get bigger, they become slower and more beurocratic. In a mature industry with little outside competition, just about any idiot can be the CEO. The business more or less runs itself at that point. And from everything I’ve ever heard about Dell or Jobs, they aren’t exactly backslapping frat boys. Dell worked for years - and hired other people - to help him become personable - being a leader in the sense of “being someone people would follow” was not a natural state for him. And Jobs is charismatic and talented, but a ego driven jerk. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [February 6, 2009, 3:56pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/132 "2009-02-06T15:56:54Z")
While I certainly have a perspective on this issue, I would rather just tell a story. It is no substutite for logic or data, but I thought it was kind of interesting. One of my best friends is a senior associate at Great Big NYC Law Firm who represents large corporate clients in structured financial transactions. We got to talking about this last night, as he interacts directly with extremely senior executives on a regular basis due to the size and sensitivity of the transactions he manages. Apparently he had several conversations with his biggest clients about this. To a man, all of them said they would prefer to run their companies into the ground than accept a bailout with a $500k salary cap. If Obama’s strategy is to punish the greedy losers into insolvency, it’s brilliant. ---
**Author:** ![tagos](https://avatars.discourse-cdn.com/v4/letter/t/bbe5ce/32.png) [@tagos](https://boards.straightdope.com/u/tagos)\ **Post date:** [February 6, 2009, 4:01pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/133 "2009-02-06T16:01:15Z")
> [@Maeglin](#): > > While I certainly have a perspective on this issue, I would rather just tell a story. It is no substutite for logic or data, but I thought it was kind of interesting. > > One of my best friends is a senior associate at Great Big NYC Law Firm who represents large corporate clients in structured financial transactions. We got to talking about this last night, as he interacts directly with extremely senior executives on a regular basis due to the size and sensitivity of the transactions he manages. Apparently he had several conversations with his biggest clients about this. To a man, all of them said they would prefer to run their companies into the ground than accept a bailout with a $500k salary cap. > > If Obama’s strategy is to punish the greedy losers into insolvency, it’s brilliant. Well, to a man these people should be capped in a more final sense. Bunch of sociopaths. ---
**Author:** ![Ensign\_Edison](https://avatars.discourse-cdn.com/v4/letter/e/7ab992/32.png) [@Ensign\_Edison](https://boards.straightdope.com/u/Ensign_Edison)\ **Post date:** [February 6, 2009, 4:03pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/134 "2009-02-06T16:03:54Z")
> [@tagos](#): > > Well, to a man these people should be capped in a more final sense. Bunch of sociopaths. And it’s extortion. “I’d rather drive the company into the ground” is not the same as saying “I’ll quit and find another job”. It’s saying “Give me more money or I’ll wreck up the place”. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [February 6, 2009, 4:19pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/135 "2009-02-06T16:19:39Z")
> [@tagos](#): > > Well, to a man these people should be capped in a more final sense. Bunch of sociopaths. The ones willing to make sacrifices will be saved; the rest will fall. This sounds like the market at work to me. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [February 6, 2009, 4:27pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/136 "2009-02-06T16:27:30Z")
> [@Maeglin](#): > > The ones willing to make sacrifices will be saved; the rest will fall. This sounds like the market at work to me. Actually the companies will fail taking a lot of jobs with them. The employees will go down because of an oversized sense of self importance at the top.It has nothing to do with the viability of the enterprise itself. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [February 6, 2009, 4:38pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/137 "2009-02-06T16:38:27Z")
> [@gonzomax](#): > > Actually the companies will fail taking a lot of jobs with them. The employees will go down because of an oversized sense of self importance at the top.It has nothing to do with the viability of the enterprise itself. But the demand doesn’t go away, nor does the skilled labor. Companies that know how to run their businesses can do very, very well when their competition fails. ---
**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 6, 2009, 4:54pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/138 "2009-02-06T16:54:11Z")
Maybe we dismissed the guillotine option too quickly. I’m not saying we’ve reached the point of actually decapitating any CEO’s. But seeing us build one might help them refocus their priorities. ---
**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 6, 2009, 5:37pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/139 "2009-02-06T17:37:33Z")
[QUOTE=gonzomax] Actually the companies will fail taking a lot of jobs with them. The employees will go down because of an oversized sense of self importance at the top.It has nothing to do with the viability of the enterprise itself. [/QUOTE] I’m confused here. Wouldn’t the magic job making machine that originally formed those companies just do it’s thing and create a new business (better, to be sure)? Perhaps the new magic job maker thingy will also staff the new company with some of the horde of low paid but very talented CEO’s in waiting, ehe? -XT ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 6, 2009, 6:00pm UTC](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413/140 "2009-02-06T18:00:55Z")
> [@tagos](#): > > These banks have not just had a ‘bad year’. The Bad Year was a culmination of many ‘bad’ years whose true nature was not recognised because assets were not priced correctly. It was all one big illusion at best or more probably a deliberate Exxon style con. I don’t believe it was a “con”. I believe it was incompetance. And incompetance should not be rewarded. I see a lot of these people. They are all cogs in some big financial machine passing reports and analysis to each other or to traders and salesmen who then congradulate themselves on how brilliant they are when in reality they are full of shit. Sometimes I think they actually believe their own hype. Here is a perfect example of what I call the Corporate Fantasy mentality. At my old job, we were on some corporate boondoggle where they flew the whole group out to some team building retreat crap (that in and of itself total bs). Yeah, it’s fun and all, but it serves no useful business purpose. So one of my coworkers is like “These are great because you get to network with our colleagues from all the other offices.” Me “Name three people you met this week.” At which point he became very annoyed and defensive. Basically a lot of organizations build these elaborate fantasy worlds for themselves to live in. And it can take the form of anything from believing the Core Values, or that idiot down the hall is a “real gogetter with upper management potential” or that their vaporware software will be a viable business in a year or that you deserve a million dollar bonus. > [@xtisme](#): > > I’m confused here. Wouldn’t the magic job making machine that originally formed those companies just do it’s thing and create a new business (better, to be sure)? Perhaps the new magic job maker thingy will also staff the new company with some of the horde of low paid but very talented CEO’s in waiting, ehe? [Previous page](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413.md?page=6) [Next page](https://boards.straightdope.com/t/no-bailout-exec-can-earn-more-than-500-000-good-idea/484413.md?page=8)