Today the Voice of America reported (amongst others) that President Obama will seek to cap executive pay at $500,000 for any company that accepts bailout money. This after a storm of criticism has washed over Citigroup and Bank of America about bonuses, corporate planes, and my favorite, trips to Las Vegas.
While it certainly seems to me that anyone who requires a bailout should at least have some humility, few CEOs in my own experience do. What they have is a competitive urge and drive to succeed. While in theory humility and drive do not conflict, in practice I am hard pressed to name a CEO who has both, with one exception that proves the rule, Warren Buffett.
Were we to impose humility on CEOs I would be concerned that we would end up with second string players in a Superbowl situation. On the other hand, bonuses in the face of a bailout are insulting to those taxpayers who effectively have paid them. And so some balance should be struck. My own thinking is that these guys should be capped so long as (a) they’re taking money, and (b) their company is not profitable. Shareholders shouldn’t get bonuses either, however. And so while a company is taking money it should not issue a dividend, and the money it takes shouldn’t come for free. I wonder whether the U.S. should require options of a certain amount or actual stock. This way we share in the company’s successes as well as failures.
What are your thoughts?