Get the Bastards: The Futility of Executive Pay Limits
Blomberg reported this week that at least five AIG executives have threatened to resign due to pay caps, including, the General Counsel, the head of a non-U.S. life unit, a senior VP of financial- products, head of the non-U.S. property casualty, and head of U.S. property casualty. The CEO Robet Benmosche, threatened one month earlier to leave due to pay restrictions. Limiting pay in this case was so harmful, that the Pay Czar had to renege on the pay caps or risk substantial injury the firm. Check.
Goldman Sachs recently announced that they will scrap cash bonuses for executives in favor of stock options. Good Timing. They claimed it was to align shareholders and managers, but since the Pay Czar claimed authority to regulate pay over non-TARP, non-financial companies it is likely that concern over cash bonuses had a significant influence. The last time that the US set direct pay caps on pay was during World War II, where FDR set maximum wage limits. To compensate workers, companies began offering health insurance. Thus government meddling in the free market, has given us the awkward mess of employer provided health care insurance. Thanks and Check.