Skip to comments.You Be the Judge: Should Executive Pay Be Capped at Government-Owned Companies?
Posted on 06/03/2012 6:53:59 AM PDT by Kaslin
Im guilty of usually seeing the world through a rigid prism of right vs wrong. But I think thats understandable since Im often writing about clear-cut issues such as the corrupting nature of big government or the foolishness of class-warfare tax policy.
But I periodically come across topics where Im not sure about the right answer. So I throw these topics out there to see what other people think.
Previous editions of you be the judge include: Putting politicians on trial, vigilante justice, brutal tax collection tactics, child molestation, sharia law, healthcare, incest, speed traps, jury nullification, and vigilante justice (again).
Now Ive come across another example. Over in France, the socialist government says it wants to impose pay caps on corporate executives. That seems like a very bad idea, but theres a catch. The proposal applies to government-owned companies.
Heres a description from the Financial Times.
Frances new socialist government has launched a crackdown on excessive corporate pay by promising to slash the wages of chief executives at companies in which it owns a controlling stake, including EDF, the nuclear power group. According to Jean-Marc Ayrault, prime minister, the measure would be imposed on chief executives at groups such as EDFs Henri Proglio and Luc Oursel at Areva, the nuclear engineering group. Their pay would fall about 70 per cent and 50 per cent respectively The government also wants to pressure other companies in which it owns a stake to follow its lead, even though it has no legal power to force such a change. France is unusual in that it still owns large stakes in many of its biggest global companies, ranging from GDF Suez, the gas utility; to Renault, the carmaker; and EADS, parent group of passenger jet maker Airbus. Mr Ayrault said he believed in the patriotism of company leaders and their willingness to share the countrys economic pain.
The analogy that pops into my mind is Fannie Mae and Freddie Mac. Those government-created entities (before the crash) were used as piggy banks by members of the political elite, who would take a break from climbing the ladder in Washington and spend a couple of years raking in millions of dollars by overseeing subsidized mortgages.
Or what about Government Motors? Or companies like Solyndra that are part of the green energy scam?
So even though Im completely opposed to salary controls on the private sector, I dont view government-owned and government-subsidized companies as being part of the free market.
But I also worry a lot about slippery slopes, so heres my thought process.
So whats the right answer? If were allowed to fantasize, the obvious decision is to shrink government to its legitimate size so there arent any government-owned or government-subsidized companies.
But if were forced to deal with the world as it is today, then the choice is much more difficult. If we oppose pay caps, then political insiders can use cronyism to get undeserved payouts. But if we endorse pay caps, then were giving politicians power that almost surely will be abused.
If you put a gun to my head, I guess I would oppose pay caps. But I hate saying that since few things are as outrageous as rich people using the coercive power of government to take money from those with less.
There shouldn’t be government owned companies
Executive pay at government-owned companies should be capped at whatever level is low enough to make sure that government-owned companies no longer exist.
Government owned companies is an oxymoron.
My biggest issue with this is the perceived acceptability of government owned companies, in the first place. The gubbmint has no business being in business.
“There shouldnt be government owned companies”
I think minimum wage is just about right.
The Federal Government is not in the profit-and-loss business.
It has been in the theft of John/Jane Q. Public’s money since 1913 - 16th Amendment to the U.S. Constitution.
I do not favor federal capping of private sector paychecks, period.
As a former government wonk, in a ‘GS’ scale job, the pay I received as an equivalent ‘administrative assistant’, was almost double what the local ‘fair market salary range’ demanded, for the same type of work.
If the ‘voters’ allow gooberment involvement in business, then they should expect government to call the shots with such owned companies. Same with healthcare. If government is footing the bill expect controls over your lifestyle choices. It’s what the voters want ya know......
No, because there should not be any government-owned companies. Don’t deal with a symptom, just get rid of the enterprise completely.
RATES OF BASIC PAY FOR MEMBERS OF THE SENIOR EXECUTIVE SERVICE (SES)
RATES FROZEN AT 2010 LEVELS
EFFECTIVE JANUARY 2012
Structure of the SES Pay System
Agencies with a Certified SES Performance Appraisal System
Agencies without a Certified SES Performance Appraisal System
WTF? The honchos at Fannie, Freddie and GM have pay packages WAY above these puny numbers.
Not only capped, they should NOT have the ability to vote/give themselves or their coworkers/cronies pay increases, bonuses, travel expenses, or any other largess. The recent (exposed) GSA examples are prime examples why...
While at first glance I whole-heartedly agree, there are within the US services that are provided by state/county/municipality governments in what is called "Enterprise Divisions". These include EMS, electrical utilities, and water/sewer utilities. Some counties have the local airport as an "Enterprise Division". An enterprise division operates off of funds generated by the service provided, and occurs when there are numerous jurisdictional boundaries that are crossed. Fees charged would be landing fees at the airport, ambulance fees, and utility fees. So it does happen that the government can and does own/operate businesses.
Maybe the CEO’s of government owned companies should be capped.
WTF! Where in the Constitution does it say that the Government should own companies? Still reading! Gave up. Can’t find it.
Case in point: a number of years ago, Recognition Equipment Inc. (Dallas TX) was bidding to supply multi-line optical reading mail sorting machines to the US Postal Service. REI had the inside track on winning the bid, because they had a product that was second to none for doing the job. Like many companies, REI employed a consultant in Washington DC who proved to be a problem. How big a problem? The CEO and one of the vice presidents were charged with conspirecy to commit fraud, specifically bribery. By the time CEO William Moore was able to exonerate himself, he had lost his position at the company. Not to mention income. (The reports indicate that there was some alleged misconduct on the part of the prosecutors, but a Court held that the prosecutors were immune to prosecution themselves -- but that's another discussion.)
How many government CEOs ended up in Court because of the housing market collapse? How many Congressmen, for that matter? Hear the hollow laugh!
The level of legal and oversight exposure, therefore, doesn't hold for government owned and operated businesses. The "Board of Directors" is effectively Congress, who regularly has conflicts of interest with the proper regulation of the businesses. The shareholders? Those are the taxpayers, and I have yet to receive a proxy for Fannie Mae, for example, to "help" steer policy.
Indeed, the housing crash shows just how insulated the heads of Fannie Mae and Freddie Mac from the results of their decisions. If both of those entities were privately-held corporations, the heads would have been out on their collective asses years ago -- which just goes to show why executive compensation is much higher than Joe Grunt...when the risk warrants the high pay.
Because the executives of government corporations don't have the exposure that executives of private corporations have, I suggest that we cap compensation based on the level of risk, responsibility, accountability, and authority. If a CEO can't fire an incompetent or a slacker, then he doesn't have the authority. If his compensation isn't tied to performance, then he doesn't have significant and real accountability.
Perhaps the answer is to add a few more rows to the General Schedule for annual pay, and put the executives on GS pay scales. GS-16 through GS-20 could be interesting. Also, how about putting the President of the United States on GS-20?
Bonuses? Those aren't part of the GS tables, but I don't know if people in the lower GS levels get bonuses or not. Bonuses should be capped, though, if they aren't already.
Expenses? When I was working for Rockwell, there were very specific rules as to which expenses would be reimbursed. Lower-level government employees, I understand, operate under similar rules. Those rules should go right up the ladder, all the way to the President.
Expanding the GS tables keeps all of this capping stuff within the Federal family, with little risk of it leaking to private businesses of all kinds. That's because the situation for private business is sufficiently different than for public business that government rules for non-government jobs just doesn't make sense.
Then there is the gray area: contractors. They are a private business, but judging from the contracts I've submitted bids for, the government has a number of conditions that have to be met in order to be considered. Of course, the contractors don't have to bid, so executive pay caps as part of contract conditions is less burdensome than Congress using guns to force executives to take pay cuts. (Passing a law is using guns to get your way, don't kid yourself.) One area for improvement in government contracting is to get control of overruns. Or how did the guy put it in the movie Contact? "Why build one, when you can build two for twice the price?"
Now, someone will bring up this argument: "The duty of a government bureau is to put itself out of business as quickly as possible." How may bureaus have you seen that die gracefully when they are finished, for varying values of "finished"? So that brings up another issue: Congress should have sunset provisions in every bureau it creates to solve a specific problem. The number of bureaus with unlimited lifetimes should have well-defined limits on their charter and their actions. Examples of "good" bureaus are the FAA and the FBI. Other bureaus (some are called "departments") are deserving of regular reevaluation, and by default should die if not renewed. Some should be abolished as useless or even harmful.
But I digress a little. Pay for government work should be handled by the GSA all up and down the line, including the President. (I would also argue that Congress should be included if they are not already.)
If our politicians don't like these proposed restrictions, then they need to form "government" corporations exactly as private corporations are formed, and I would also suggest they be funded the same way, by monied shareholders who will then keep the gov-corp's feet to the fire to show a return on the shareholder's investment.
Red herring question. The government should not own any companies.
Which is why both are bad ideas and the second plainly unconstitutional, the first one (at least) implicitly so.
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