Last year when I deplored, in the editorial pages of the WSJ, the gall Wall Street had to blithely cheer the downfall of Eliot Spitzer, I received a flood of hate mail. Letters poured in claiming the overwhelming majority of Wall Street folks were ethical and that Spitzer acted entirely unfairly. Who was I to sweepingly condemn the mores of an entire class of white-collar professionals from my lofty academic perch?
All I can say now is, I told you so. For what kind of person takes tax money from government bailouts to lavish millions in year-end bonuses on failed leadership? The mortgage bubble was deliberately fed by blinding short-term greed from these very executives. It's nice to finally see some appropriate outrage from Obama, who just announced a mandatory salary cap of $500,000 for any executive in a company receiving government bailout funds.
And if that is going to scare executives away, then frankly I say good riddance! There are thousands of qualified people willing to put in a hard day's work heading multimillion dollar corporations for reasons that go beyond amassing personal empires of material wealth. They want to make a difference in this world. They understand that past a certain point, money provides little satisfaction. What is immensely more fulfilling is receiving the intrinsic satisfaction of using one's great power to the greatest benefit of all concerned. And those are precisely the kinds of people who should be running things. Not those primarily motivated by the instrumental satisfaction of achieving the greatest possible financial compensation.
Perhaps this will have a cleansing effect in the highest reaches of corporate power, as the greedy retire to make room for the virtuous. Personally, I would have gone much further. The government should have purchased controlling stake in the failed banks (and perhaps even GM) and replaced the entire top brass. There is no reason these shortsighted architects of the greatest economic collapse since the Great Depression should get to keep their positions on the backs of honest taxpayers. Furthermore, everyone knows GM has been mismanaged for at least a generation. Not only has it been making extremely poor quality vehicles, but its executives could not even present a coherent plan when groveling at the government trough before congress at Christmastime. I say out with the old and in with the new. There must be accountability for such blatant and sustained incompetence.
Still, old habits die very hard. David Brooks for example just wrote a piece mocking "Third Ward" D.C. critics of the last round of executive bonuses culled from the bailout. He jokes throughout an entire column of unrelenting sarcasm that these are privileged upper-middle classes envious that anyone should be making out better than they, especially in such hard times. This is not only in incredibly poor taste, but is betrays a complete lack of any comprehension of where the outrage stems from.
It is utterly shameful to take hard-earned taxpayer dollars to shower more millions onto those primarily responsible for the crisis to begin with. As I said, not only should their pay packages be capped, in most cases, they have no business even retaining their jobs! Last I checked, they believe in the free market, which rewards success and punishes failure. But where in this bailout is their punishment? All I see are millions of middle and lower class Americans losing their shirts--and seeing their taxes used to protect the extravagant lifestyles of those who deserve punishment the most.
When executives still "earning" massive compensation from government bailouts are interviewed they seem to all say they deserve their admittedly obscene bonuses. Whatever that means. And that government caps on executive compensation amount to socialism.
I've got news for you folks: A bailout is socialism!
Socialism is not a form of totalitarianism. It is simply control by the people. And if failing and foundering corporations are saved by the people's money--even when these companies don't deserve it--basic contractual justice (not to mention retributive and compensatory) requires accountability, and yes, some degree of control by those bailing out, i. e., the people. Those who would have it any other way are acting like spoiled brats who always want to privatize benefits (to them) yet socialize costs (to others).
It's high time they grew up.
Thomas Frank makes a good case for capping executive compensation across the board today in the WSJ. Interestingly, he skewers David Brooks' latest column too--but against the illuminating background of his earlier writings. Definitely worth a read. Here's a particularly salient point on why the bailout didn't include caps to begin with:
If the federal bank bailout were to involve a real crackdown on executive compensation, the Bush administration reportedly feared, it might have driven banks away from taking the deal altogether. Bankers would prefer global disaster to a pay cut, in other words, and this obscene calculation needed to be taken into account. Public outrage was apparently nothing by comparison.
Paints a chilling picture of a truly depraved corporate culture. I'm not sure I would go so far as to assume bankers wouldn't have taken a bailout with executive salary caps. But if what Frank says is true, namely, that the administration said it feared they would, that's disturbing in itself. Ultimately, those executives can only answer for themselves. Let's hope they're beginning to take a long hard look in the mirror. At long last.