Thursday, October 22, 2009
The decision to slash the compensation of executives whose companies received bailout funds is a political powerplay designed to appeal to the public. The public will like it and agitate for compensation reduction for other CEOs as well. Missing in this coup de main is any sense of what the marketplace establishes as compensation for top executives. From what little I know, it is a great deal higher than what the pay czar has set. This will have two outcomes. CEOs will try to pay back government loans as quickly as possible to get out from under government control. Top executives will not readily step up for the CEO position should any one of the CEOs step down. While cutting CEO pay appeals to the masses, that doesn't make it the best public relations.