Friday, February 06, 2009

Setting executive pay

There's a certain "he who pays the piper calls the tune" aspect to Obama's announcement that firms that take bailout money in the future will not be allowed to pay their top executives more than $500,000 a year. If you lie down with dogs and all that. And despite my acceptance in principle that firms should be able to pay what they want and concern that this could be a camel's nose leading to more government dictation of corporate behavior, I'm convinced that some firms went overboard with executive compensation (in part because of government loose-money policies, to be sure) and became clueless and insular. And of course, giving CEOs big bonuses when their companies are in the tank is absurd and pretty much the opposite of what a truly free market would produce, at least most of the time.

Here's the Register's editorial on the matter. We should be concerned about further efforts to dictate corporate policies -- and some are already in Team Obama's plans. But the simple solution for companies that don't want government micromanaging them is not to take bailout money.

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