The Pay Czar

Jeff has asked me to keep an eye out for talented conservative voices to contribute here at America’s Right. And while the University of California, Berkeley would never be the top of my “Best Places to Find Conservative Writers” list, you know that a conservative studying at Berkeley has got to be tough. And MS is tough. Here is her first piece for America’s Right, in which she turns her skeptical gaze on one of those strictly “advisory” czars: The Pay Czar. — Robert


By MS

America’s Right

I don’t really like the “czar” term. It seems dramatic. Then again, I was under the impression that the “czars” were simply advisers to the President, without power of their own for action. That was my own ignorance, I suppose.

I didn’t hear anything about Kenneth Feinberg, the “Pay Czar,” until I read it in the context of the battle between the White House and Fox News Channel. But a cursory search lead to this:

According to The New York Times:

Kenneth R. Feinberg was appointed by the Obama administration on June 10, 2009, as compensation overseer with broad discretion to set the pay for 175 top executives at seven of the nation’s largest companies, which have received hundreds of billions of dollars in federal assistance to survive.

The government bails out these companies … and then runs them, yeah? Another problem with bailing them out in the first place.

Mr. Feinberg’s plan, announced in October 2009, will cut total compensation by about 50 percent for 25 top earners at seven companies that received exceptional help. The companies affected are Citigroup, Bank of America, American International Group, General Motors, Chrysler and the financing arms of the two automakers.

Here’s the interesting thing: when I read about someone making millions of dollars, I assume that whoever is forking over millions of dollars to that someone has decided that someone is worth it, for whatever reason. I’m sure that’s not always the case, but I don’t believe a company looking to make a profit will spend that kind of money unless it is believed that it will work out to the company’s benefit.

Obviously there are other lines of thought. According to Joe Nocera, also of The New York Times:

The truth is, Wall Street simply pays its people too much money. No other segment of industry pays out 50 percent of its revenue in bonuses, only Wall Street. In no other segment do so many people get rich for doing so little for the broader society.

I’ve been reading Ayn Rand’s Atlas Shrugged recently, so I found this quote deliciously fitting. Nocera goes on to ponder what on earth these people do to deserve so much money. I found that fitting too. He’s damning them for their salaries without even knowing why they get paid. Good job, buddy.

People seem to assume that no one could possibly earn millions of dollars in pay. They don’t truly deserve the money, so it isn’t problematic to slash their bonuses and make them give back salaries they’ve already received. Apparently Feinberg isn’t that aggressive. As ABC explained:

Illustrating his general hesitancy to use clawbacks, Feinberg did not ask those employees to return any pay they received from January through October this year.

This is not the case for the Bank of America chief executive:

Bank of America Chief Executive Ken Lewis, who has announced he will leave the company by the end of the year, will receive no more pay for 2009 and will have more than $1 million of his prior pay clawed back, according to a deal Feinberg struck.

But what’s $1 million to Ken Lewis? He presumably makes many millions, so he can afford it! Right?

Wrong. The whole train of thought is off. Regardless of how the general public feels about what someone ought to get paid, there are actual reasons beyond “they’re greedy bastards” for these salaries.

Let’s pretend for a moment that these millionaires are exceptionally good at their jobs. Note that they are working for companies which are clearly struggling already. If you slash their bonuses and pay, it will be much, much easier for other companies to offer them better deals.

Consequently, what do you suppose they will do? What would you do, if one company offered you substantially more money to do your job while another required you to give parts of your salary back? How will it go for these struggling companies as people they need get better offers elsewhere? It’s not hard to imagine the next step. The ABC article continues:

Bank of America Corp said on Thursday that Feinberg’s rulings would put it at a disadvantage as it competes with firms not under the pay czar’s thumb. The bank said its employees were already being poached by rivals.

Who could have predicted that? Probably not Joe Nocera.

—————
MS is a conservative undergraduate at the University of California, Berkeley. No, seriously. Berkeley. She has been writing for America’s Right since October 2009.

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Comments

  1. Dee says:

    I had read about the "pay czar" doing this several weeks ago and was furious. This man is not an elected official and, as far as I am concerned, has no authority to do this. I cannot believe that he will be allowed to do so. I don't agree with some of the salaries but, as noted in the article, I don't believe that the companies would be paying these high salaries if the receipients were not benefitting the company. This could be only the beginning of government regulation of salaries.

  2. PUT YOUR FINGER DOWN, KENNETH says:

    Can we go all 'pay car' ourselves on this worthless dude?

  3. SPEAKING OF MONEY says:

    Bad press, including major mockery of the plan by comedian Jon Stewart, led to President Obama abandoning his proposal to require veterans carry private health insurance to cover the estimated $540 million annual cost to the federal government of treatment for injuries to military personnel received during their tours on active duty. The President admitted that he was puzzled by the magnitude of the opposition to his proposal.

    "Look, it's an all volunteer force," Obama complained. "Nobody made these guys go to war. They had to have known and accepted the risks. Now they whine about bearing the costs of their choice? It doesn't compute." "I thought these were people who were proud to sacrifice for their country," Obama continued. "I wasn't asking for blood, just money. With the country facing the worst financial crisis in its history, I'd have thought that the patriotic thing to do would be to try to help reduce the nation's deficit. I guess I underestimated the selfishness of some of my fellow Americans."

    Please pass this on to every vet and their families whom you know.

  4. JEFF SCHREIBER says:

    Fantastic job, Monica. Thank you.

    (We'll have to exchange some e-mails later on, when I've got a few moments.)

    Thanks again.

    Jeff

  5. Gail B says:

    Robert, good find!

    MS, I read your every word, agree with every word, and want to read more from you.

    Rix introduced himself. You will enjoy his comments because he looks at America's government from a foreigner's point of view. (If he's not a citizen already, he soon will be.) We are fortunate that he found America's Right.

    What in this world made you choose BERKLEY, of all places?

  6. Rix says:

    Welcome to the stable, Monica. Meet Rix, the usual "voice of constructive opposition" here.

    The evil is, as aptly noted by many, not in the size of the bankers' salaries and bonuses and not in the way they are calculated. It is in the fact that banks are allowed to enjoy a large windfall which is eye-pokingly disproportional to their labor and intellectual contribution.

    It is not that American banks are not regulated. The controlling bodies are, however, extremely reluctant to crack a whip at violators; whether they do it out of leniency, inattention or corruption remains to be seen on a case-by-case basis. Were existing financial regulation properly enforced, Wall Street would enjoy a singificantly smaller income, thus reducing the need – as well as capacity – to attract top talent "by whatever means necessary". The problem would have been solved without changing a single letter of the law. Too bad some fat political donors may wind up in graybar motel, so we are unlikely to see the Congress act on this one…

  7. Anonymous says:

    If Kenneth is left handed, he has a wimpy trigger finger.

  8. Edward says:

    Not exactly sure what Rix’s point here is but I tend to agree with the gist of his argument. Banks that took billions in bail-out money (as I believe they should have) cannot complain when the new owners exert their influence no matter how detrimental it is to their long term health. Acting in the worst interest of the institution it professes to save is a theme with this crew; after all they gave GM to the union.

    To the larger point of what these guys are worth– there isn’t really a debate here. The market has answered the question year after year for decades. A lack of understanding by people that have no experience in equity finance is not an indictment of Wall Street. Joe Nocera’s statements about banker pay says more about his ignorance of all things not Joe, than about fair compensation. Does he make the same argument about Arod? Michael Jordan? Perhaps he’s hit enough baseballs or shot enough hoops to know he probably shouldn’t mouth off about that which he cant’ do. Same applies here. Most of the people being paid those huge salaries are worth it – there are exceptions but they are just that, exceptions. Populist plays to class warfare aimed at outlawing big pay packages will simply accelerate what the financial crisis and Obama’s huge deficits have already started, the exodus of finance from the U.S. And with it will go all those highly paid, 50% tax-bracket bankers. How’s New York handling the disappearance of 10,000 top-tax rate jobs?

  9. La Muse Poetique says:

    Hahaha. I didn't read the name of who wrote this and I was thinking "Deja vu???"

    Yay Monica!

  10. Are we there yet? says:

    I'm thinking deja vu, too. I know I read this before….

    Anyway, great job, Monica. This runs along the same lines as "rich" people getting taxed so much by certain states *cough*CA*cough* that they leave.

    Liberals are seriously short-sited re economics in their zeal to do-good.

  11. Bodenzee says:

    Monica must be a sleeper or mole. "Conservative" isn't in the Berkeley version of the Newspeak dictionary. ;-)

  12. suek says:

    Check out this article. And go to the main page if you want more. There should be some serious prosecution going on, but there isn't because the fox is _in_ the hen house as well as "guarding" it.

    what about government complicity?

    Bodenzee…hey…why _not_ infiltrate – that's what the lefties have done to _us_ over the last 50 years or so! Turn about's fair play – and maybe the only way to go!

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