Bonuses Banned!
Posted by Ray on July 28, 2009 under Main | 
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It sounds much worse than it actually is, but Barney Frank and Co. approved legislation that would let regulators ban incentive pay at banks and give shareholders a vote on bonuses in response to public outrage over Wall Street pay.
Here is the really funny part, the shareholder “say on pay” is nonbinding which means it can be ignored by the company, so far pretty weak in my opinion. I do not think that the government should have anything to say on employee pay or executive pay with the exception of government owned firms, but I do think shareholders should. It is the shareholders who own the company and they should have a binding vote on what they think management is worth.
However, in this increasingly socialized society it seems that government thinks it knows best which should scare every American. The good news is that, out of the kindness of Barney’s heart, an amendment was added to exempt some companies. The committee approved an amendment from Frank that authorizes the SEC to exempt some companies from the shareholder votes. He said the amendment gives the SEC flexibility to weigh the effect of so-called say-on-pay on “small” companies. Now define “small” and we are all set. Finally, the compensation committee must be independent and a non-board member, which is actually a very good thing.
What does this mean
It means that we are on a very slippery slope where government is expanding its reach into corporate America at an ever increasing rate. I agree that shareholders need to have a right to say what executives get paid, but to give the SEC the right to say no bonuses is insane. This is the same organization that a person brought proof that Madoff was a scam and they did nothing, actually I take that back they gave him a clean bill of health.
Regardless, we are entering a phase when government is thinking erratically and is simply responding to populist outrage and they are not even responding to the actual outrage. Americans are made that these firms are bailed out to begin with. Forget about systemic risk since we will never really know if there was systemic risk or not. These bailouts cost Americans dearly and we got nothing in return.
The government tells us we will profit from these bailouts, but do we really? I have never received a dividend check or a note in my paycheck saying that because we profited from these investments this month’s taxes are on us. We get nothing, period, and to make things worse the government is going to keep a TARP slush fund for emergencies. This tells me that they know we are not out of the woods yet and confirms my belief that things will get worse.
We need to do something about this runaway government or things will get more uncomfortable for us. I, like you, do not need the government to take care of us. We have great health insurance, but it is expensive which makes the problem an accessibility problem, not an overall health care crisis. The whole new “change” thing just seems to be greater intrusion into our lives from controlling our health care to, now, how much we can get paid.
The other thing they have to realize is that not everything is a crisis, most things are minor problems, but in America everything needs to be a crisis which is ridiculous. They then take these crises and use them to propel their agenda which seems to be getting more personal with each new crisis. So stop with the crisis, stop telling us the public health insurance plan will be great when you won’t even participate in it and stop telling us we will profit from something that we will never see.
The fact is that government does not know what is best and they should tread lightly around their constituents considering their low approval ratings. The populist outrage that Barney Frank and the rest of the crew should be responding to is the need for term limits and real campaign finance reform. Oh, wait that would interfere with the business as usual corruption that they profit from now.
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