Thursday, October 22, 2009

What's Up With a 90% Pay Cut?

Today we learn from (and others):

The Treasury Department is expected to formally announce in the next few days a plan to slash annual salaries by about 90 percent from last year for the 25 highest-paid executives at the seven companies that received the most from the Wall Street bailout. Total compensation for the top executives at the firms would decline, on average, by about 50 percent.

The seven affected companies are: Bank of America, American International Group, Citigroup, General Motors, GMAC, Chrysler and Chrysler Financial.

Smaller companies and those that have repaid the bailout money, including Goldman Sachs Group Inc. and JPMorgan Chase & Co., are not affected.

On the one hand, it can be argued that since these companies have essentially sold (or leased, or mortgaged, or whatever term you prefer) their souls for government bailout money, and since "the borrower is servant to the lender," that the government is perfectly entitled to keep these companies' executives' pay at whatever level it sees fit.

On the other hand, it can be argued that government interference in the compensation of law-abiding company employees is a gross violation of civil and corporate rights, and sets a horrific precedent for future government interference.

So which side of the argument is correct? I would suggest that both sides are correct.

How is that so? This entire argument is based on a false premise: The idea that government should ever have "bailed out" the aforementioned companies in the first place. Whenever the government gets involved in an area that is beyond its constitutional boundaries or that interferes with the God-given rights of its citizens, it spawns a new set of issues...issues which generally have no simple means of resolution.

American citizens should be angered both by the arrogance of corporations to lavish wealth on executives who are taking their money while running these corporations into the ground, and also on the government, for interfering in the process. Their greatest anger should be directed toward the fact that we ever got here in the first place.

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