Compensation Caps

Barney Frank is a Congressman from Massachusetts and the chairman of the House Financial Services Committee (the committee in the U.S. House of Representatives that "oversees the entire financial services industry, including the securities, insurance, banking, and housing industries."). You may have seen him in the news recently, lambasting the bonuses paid out to AIG executives.

Well, now Congressman Frank is proposing that the government have control over the compensation of all employees of companies that receive government/bailout funds...

Byron York points out:

"[I]n a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the “Pay for Performance Act of 2009,” would impose government controls on the pay of all employees — not just top executives — of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies."

Were people (rightfully) ticked when some AIG executives got >million dollar bonuses a few weeks ago? Yes! Were people given the whole story (as in, some of those executives worked for salaries of $1 and were part of the company that was thriving and not in the sectors that brought down the insurance powerhouse?) No!

I feel a little bit caught between a rock and a hard place on this issue. Do I think that companies who receive government (i.e. MY) money should be paying the employees responsible for failure millions of dollars? No. Of course... do I think that the government should EVER pour money into failing companies? N-O! And, do I think that the government should have any say over the compensation of any employee of any company? Well, this is where it gets tricky.

While I absolutely abhor the idea of executives who beg for bailouts getting fat checks while refusing to cut costs, I also think that allowing the government to mandate compensations for regular employees is a very bad idea.

When the government is allowed to say how much someone in a private-sector job should be paid, they are overstepping their power. I really think that if any bill is passed which allows our government to have this authority over "bailed out" companies, it could soon trickle down to the rest of us. First, they say they can control pay for employees of companies receiving government funds. Then, they'll say that that also includes the companies who contract with the bailed out companies; then it will include anyone who supplies/works with bailed out companies... until finally it includes everyone everywhere.

The proposed measure is also retroactive, which means it would break any pre-existing contracts for employees' salaries and include the past several months' worth of pay. Retroactive? How is that legal?

Even if there were a way to limit compensation control to only those companies directly receiving money from the government, I don't think we should let Tim Geithner (U.S. Treasure Secretary, a man who couldn't properly pay his own taxes) and anyone in our legislative body have any say on the matter. These are the same people who approved an automatic yearly raise for themselves while running up the national defecit to unprecedented levels, and they want to be able to determine what someone's salary is worth?

Give me a break.