Pres. Obama Limits Executive Pay

Today’s Wall Street Journal has an article indicating President Obama’s plan to limit executive pay for companies receiving TARP funds from the government. This is a terrible idea. Executives who run their companies into the ground or the hands of a “white knight” should be fired with prejudice. An executive taking over a fallen company might very well find the offer from the Board to be below standard or the market because of the damaged situation they are inheriting but thought of government dictating pay policies should give us all pause. If the government feels right to limit the pay of CEO’s whose pay is a very small percentage of labor costs why stop there? They will start to exert influence in all manner of ways concerning costs and why stop there why not look at revenues? They will pressure firms to invest in alternative energy, emerging industries, mortgage relief, any number of policy ideas which would never reach the boardroom let alone mid level corporate decision makers! I am afraid that “pork” which is in the stimulus bill will emerge in the investment decisions of the firms who receive TARP funds. The life ring thrown to these firms may turn in hindsight to be seen as an anchor.