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Relative to the bailout money received, it certainly should have a say. As stated on one of the non-linkable comments: "A loan is a contractual agreement. Ban

Relative to the bailout money received, it certainly should have a say. As stated on one of the non-linkable comments: "A loan is a contractual agreement. Banks attach conditions to loans all the time...and, usually, the riskier the loan the tougher the conditions. The same holds true here. If a failing corporation accepts a loan from the government, it must also accept its terms. Ms. Fiorina, don't forget capitalism can't exist without the freedom to contract...the same freedom that allows people and corporations in America to "decide what each job is worth." Good comment!

jmtulloss 18y ago
Well certainly they can attach conditions, and the government has. A bank should not, however, attach conditions which almost certainly detract from the client's ability to pay back the loan. It's bad business, something the government seems to be quite good at. By limiting CEO pay to companies that are heavily invested in by the government, you assure that some bright, competent CEO will never take over your company except for the sheer, masochistic joy of bringing a dead company back to life. Instead, you will be stuck with the incompetents who got you into the situation in the first place and are just happy to keep their jobs, multi-million/billion dollar pay cut or not.
- homme 18y ago
  Instead, you will be stuck with the incompetents who got you into the situation in the first place and are just happy to keep their jobs, multi-million/billion dollar pay cut or not. Or clearly superior talent like John Thain, et al. Do you seriously mean to imply that there are no individuals out there making less than 500k per annum who could not pull off a deleveraging and conservative restructuring of a business? No one? Who are these individuals who will work for no less than several million per annum who have pulled off such miracles that no mere person earning less than half a million per year at the moment clearly outclass? Certainly they have not been at the helm of any financial institution I am aware of. Hell, I nominate mynameishere for one of the positions, as he seems to have a clearer grasp than most of the idiots at the helm last go-round: http://news.ycombinator.com/item?id=308425 http://news.ycombinator.com/item?id=308425 And he probably is available for 500k/yr.
  - wheels 18y ago
    Well, there is this one guy, but he's a bit sick at the moment. http://en.wikipedia.org/wiki/Steve_Jobs http://en.wikipedia.org/wiki/Steve_Jobs
    - homme 18y ago
      I don't know. Steve has excellent empathic design acumen and taste, but do you think thats whats required to stop making dumb loans and restructure and write off bad debt? Not saying he couldn't do it, but the skill sets seem orthogonal. The crux of my argument is the refutation that you need someone of that caliber to do what appears to be pragmatic banking and risk management.
      - wheels 18y ago
        No, I don't. That part was a joke. I was just using him as a case of someone who could obviously set his own salary working for a whole lot of places and decides to be compensated in other ways (stock, notably). He also went back at the brink of collapse and reanimated the company, so in that aspect it's similar.
  - bwd 18y ago
    Deleveraging and conservative restructuring may work for a commercial bank, but not the hybrid commercial and investment banks that we're talking about here. These companies are involved in many diverse business lines and, bungling in the mortgage-backed business aside, many of these businesses are hugely profitable. This is why institutions like Goldman Sachs and Morgan Stanley were able to report large losses instead of collapsing: mortgage losses have been mostly offset by gains in other businesses. A CEO will need to continue to invest in the profitable business lines, with an eye on risk, to avoid being shut out of them by aggressive competitors, leaving the bank with nothing but toxic assets and low margin operations. In "How to Make Wealth" pg wrote about how salesmen are an exception to compensation rules because their performance can easily be measured. The same is true for traders who do not deal in positions that must be held for a long time the way mortgage bonds are. If a trader makes $30 million in this way, he is in a position to demand, say, $5 million to $10 million or he will be happy to join a different firm that will pay him that amount. Thus, the reduction of compensation at the top levels cannot trickle down to the lower levels without destroying the firm by causing its top performers to leave.
- njharman 18y ago
  Actually by limiting pay you will get people who are only interested in bringing a dead company back to life as opposed to people with other motives such as grabbing as much wealth for themselves before the bubble bursts.
  - jmtulloss 18y ago
    That's true, and that's a big weakness in my argument. However, if the hypothetical "best guy" can't bring himself to turn down 50 million at a competing (and probably quite close to death) firm, then the firm that needs him most should be able to pay him. There is no reason for arbitrary limits, especially when they incentivize the people most capable of saving your firm to join your competitors.
- Harkins 18y ago
  A bank should not, however, attach conditions which almost certainly detract from the client's ability to pay back the loan. Banks do this all the time, they call it "interest". The government is trying to make sure that the money is used wisely, much like banks want me to spend my loan on a house rather than hookers and blow. their money, their decision what conditions to attach to best meet their goals, which may not just be financial.
  - netcan 18y ago
    which may not just be financial that's the point to consider
jm4 18y ago
I think it's disgusting that bank executives have been giving themselves outrageous salaries and bonuses while running their companies and the national economy into the ground. I'm angry that tax payers have had to bail them out and they continue to collect outrageous salaries. I absolutely believe their pay should be cut. In fact, I wouldn't even mind a little mob justice. That said, I think I'm bothered more about a government capping the salaries of those charged with using our money to turn things around. We need the best minds working on a solution and I can't help but feel like we're shooting ourselves in the foot when we've handed over all our money and then severely limited recruiting potential. Who will want to step up and try to right the sinking ships for comparatively low pay when there are opportunities at companies not subject to a government imposed salary cap? You can't hire the best candidates when you pay the least, and on top of it all can only provide a hostile environment.
- Retric 18y ago
  Nothing is saying they cant give them 1 billion in stock, the point is they can't suck money out of the company until the government get's their money back. The government has a long and successful track record of turning companies around that have say mob connections where people cooking the books. In some way this is basically the same thing. Companies payed high dividends and passed out bonuses and stock options like candy while ignoring the risks they where taking. Some of these company's would have been fine if they had not increased the dividend they had payed from what they where paying out 5 years ago. Every time they sent a dividend / bonus out the door they where hiding just a little more of their profit from the type of risks they where taking. So, if the company is run into the ground again the CEO will get 500k/year, but if they pay back the government their is nothing preventing that CEO from walking away with 100 million / year which seems reasonable.

jmtulloss 18y ago

Well certainly they can attach conditions, and the government has. A bank should not, however, attach conditions which almost certainly detract from the client's ability to pay back the loan. It's bad business, something the government seems to be quite good at. By limiting CEO pay to companies that are heavily invested in by the government, you assure that some bright, competent CEO will never take over your company except for the sheer, masochistic joy of bringing a dead company back to life. Instead, you will be stuck with the incompetents who got you into the situation in the first place and are just happy to keep their jobs, multi-million/billion dollar pay cut or not.

homme 18y ago
Instead, you will be stuck with the incompetents who got you into the situation in the first place and are just happy to keep their jobs, multi-million/billion dollar pay cut or not. Or clearly superior talent like John Thain, et al. Do you seriously mean to imply that there are no individuals out there making less than 500k per annum who could not pull off a deleveraging and conservative restructuring of a business? No one? Who are these individuals who will work for no less than several million per annum who have pulled off such miracles that no mere person earning less than half a million per year at the moment clearly outclass? Certainly they have not been at the helm of any financial institution I am aware of. Hell, I nominate mynameishere for one of the positions, as he seems to have a clearer grasp than most of the idiots at the helm last go-round: http://news.ycombinator.com/item?id=308425 http://news.ycombinator.com/item?id=308425 And he probably is available for 500k/yr.
- wheels 18y ago
  Well, there is this one guy, but he's a bit sick at the moment. http://en.wikipedia.org/wiki/Steve_Jobs http://en.wikipedia.org/wiki/Steve_Jobs
  - homme 18y ago
    I don't know. Steve has excellent empathic design acumen and taste, but do you think thats whats required to stop making dumb loans and restructure and write off bad debt? Not saying he couldn't do it, but the skill sets seem orthogonal. The crux of my argument is the refutation that you need someone of that caliber to do what appears to be pragmatic banking and risk management.
    - wheels 18y ago
      No, I don't. That part was a joke. I was just using him as a case of someone who could obviously set his own salary working for a whole lot of places and decides to be compensated in other ways (stock, notably). He also went back at the brink of collapse and reanimated the company, so in that aspect it's similar.
- bwd 18y ago
  Deleveraging and conservative restructuring may work for a commercial bank, but not the hybrid commercial and investment banks that we're talking about here. These companies are involved in many diverse business lines and, bungling in the mortgage-backed business aside, many of these businesses are hugely profitable. This is why institutions like Goldman Sachs and Morgan Stanley were able to report large losses instead of collapsing: mortgage losses have been mostly offset by gains in other businesses. A CEO will need to continue to invest in the profitable business lines, with an eye on risk, to avoid being shut out of them by aggressive competitors, leaving the bank with nothing but toxic assets and low margin operations. In "How to Make Wealth" pg wrote about how salesmen are an exception to compensation rules because their performance can easily be measured. The same is true for traders who do not deal in positions that must be held for a long time the way mortgage bonds are. If a trader makes $30 million in this way, he is in a position to demand, say, $5 million to $10 million or he will be happy to join a different firm that will pay him that amount. Thus, the reduction of compensation at the top levels cannot trickle down to the lower levels without destroying the firm by causing its top performers to leave.
njharman 18y ago
Actually by limiting pay you will get people who are only interested in bringing a dead company back to life as opposed to people with other motives such as grabbing as much wealth for themselves before the bubble bursts.
- jmtulloss 18y ago
  That's true, and that's a big weakness in my argument. However, if the hypothetical "best guy" can't bring himself to turn down 50 million at a competing (and probably quite close to death) firm, then the firm that needs him most should be able to pay him. There is no reason for arbitrary limits, especially when they incentivize the people most capable of saving your firm to join your competitors.
Harkins 18y ago
A bank should not, however, attach conditions which almost certainly detract from the client's ability to pay back the loan. Banks do this all the time, they call it "interest". The government is trying to make sure that the money is used wisely, much like banks want me to spend my loan on a house rather than hookers and blow. their money, their decision what conditions to attach to best meet their goals, which may not just be financial.
- netcan 18y ago
  which may not just be financial that's the point to consider

jm4 18y ago

I think it's disgusting that bank executives have been giving themselves outrageous salaries and bonuses while running their companies and the national economy into the ground. I'm angry that tax payers have had to bail them out and they continue to collect outrageous salaries. I absolutely believe their pay should be cut. In fact, I wouldn't even mind a little mob justice. That said, I think I'm bothered more about a government capping the salaries of those charged with using our money to turn things around. We need the best minds working on a solution and I can't help but feel like we're shooting ourselves in the foot when we've handed over all our money and then severely limited recruiting potential. Who will want to step up and try to right the sinking ships for comparatively low pay when there are opportunities at companies not subject to a government imposed salary cap? You can't hire the best candidates when you pay the least, and on top of it all can only provide a hostile environment.

Retric 18y ago
Nothing is saying they cant give them 1 billion in stock, the point is they can't suck money out of the company until the government get's their money back. The government has a long and successful track record of turning companies around that have say mob connections where people cooking the books. In some way this is basically the same thing. Companies payed high dividends and passed out bonuses and stock options like candy while ignoring the risks they where taking. Some of these company's would have been fine if they had not increased the dividend they had payed from what they where paying out 5 years ago. Every time they sent a dividend / bonus out the door they where hiding just a little more of their profit from the type of risks they where taking. So, if the company is run into the ground again the CEO will get 500k/year, but if they pay back the government their is nothing preventing that CEO from walking away with 100 million / year which seems reasonable.