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A senator stands alone against outrageous CEO pay – until now

Submitted by on Wednesday, 4 February 2009 5 Comments

It’s been four days and not a single senator has had the guts to join Missouri Democrat Claire McCaskill as co-sponsor of her Cap Executive Officer Pay Act of 2009.

“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer,” McCaskill said Friday on the Senate floor . “They don’t get it. These people are idiots. You can’t use taxpayer money to pay out $18 billion in bonuses.”

OK, so it’s probably not reasonable to expect every politician to be as impolitic as McCaskill. But can’t at least one of the other 99 put their money where their mouths have been?

Way back in August, Democrat Christopher Dodd told the Senate banking committee as it debated the bailout bill that the “authors of this calamity” should not walk away enriched.

Republican John McCain proposed in September the exact $400,000 cap – it’s the same salary as the president, U.S., not Bank of America – McCaskill wants now.

Democrat Dianne Feinstein says her constituents are “really upset.” Note to DiFi: I’m your constituent, and I’m months beyond “really upset.” But we’ll get to that later.

Republican Jim Sessions told Bloomberg this week that small-business owners are calling the bonuses “obscene.”

Two Republicans, two Democrats. How’s that for a nice round of bipartisan inertia?

Luckily, a former colleague of McCaskill’s is taking up the cause no one else can seem to summon the courage to get behind now that there’s a proposal on the table and campaign donations at stake.

Today, President Barack Obama plans to announce a $500,000 cap on pay for any executive of any company taking “significant federal assistance” in the future.  Anything above that will be in restricted stock that won’t pay out until taxpayers are paid back, according to Bloomberg.

There’s probably not a finger left in tact on Wall Street tonight with all the hand-wringing going on.

  • The Obama measure is “too draconian and too arbitrary, and doesn’t take into account free-market forces,” Scott Minerd, chief executive officer and chief investment officer of Guggenheim Partners Asset Management, told Bloomberg. “Companies that need the most talented people to fix their problems won’t be able to pay them.”

I’m not seeing anything that stops them from being paid. I’m seeing a provision that says you’ll get your accustomed enrichment immediately after you pull your company out of this and pay back the taxpayers who saved your corporate jet-buying butt.

  • “Most people would agree that some people should make more than others, whether that’s based on skill level or education,” Alexander Cwirko-Godycki, research manager at Equilar, an executive compensation analysis firm, told The Washington Post. “It comes down to each individual’s perception of what appropriate is. Is it $100,000? 10 million? 100 million?”

Fair enough. Let’s just go with the definition of appropriate many CEOs have relied on for most of the decade, when income for the wealthiest Americans rose 9 percent as the median income for working-age households fell.

“Times are tough, and we’re going to have to ask all of you to make some sacrifices. We’re freezing pay and want you to work smarter, not harder. We know this is not an easy thing, but it’s what we need to do to pull out of this.”

  • “It would be really tough to get people to staff” companies forced to impose these limits, James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm, told The New York Times. “I don’t think this will work.”

That argument would work if anyone could point to a bank executive anywhere who hadn’t collected beau coup bucks over the past few years in bonuses built on a bubble that inevitably, tragically would pop. If anyone could find a financial CEO who had stood up and said, “This does not make good business sense. Let’s stop.”

If the pay limits drive away failed leaders, so be it.We really don’t have much left to lose.

Copyright 2009 Debra Legg. All rights reserved.

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  • Leslie K. said:

    I want to know – can we hang people for treason?

  • Debra said:

    I don’t think we can in this case. Maybe a nice sentence to a lifetime of being told to work “smarter, not harder” would be appropriate, though. Oh, and of having every dime on every expense voucher scrutinized instead of just hopping on the jet.

  • MtnMom said:

    I think I just heard Obama say he want the caps at $500,000. That is still too high in my book. The greedy goons that got us into this mess should be fined, not guaranteed $500,000 a year. But, the fact that the President is giving this some attention is a good thing.

  • junkyarddog said:

    If they don’t want to work for $500,000 let them walk. Where are they going to go. Theres a lot of capable people that would be more than happy to work for that money

  • Debra said:

    EXACTLY, junkyarddog. I’m thinking there are plenty of hungry junior executives long frustrated by the shenanigans at the top who would love a crack at seeing what they could do. They’d happily accept the half-mil, plus stock options that’ll pay off down the road when they can turn it around.