Needless to say, there's a lot of wailing and gnashing of teeth from the business ideologists.
"That is pretty draconian; $500,000 is not a lot of money, particularly if there is no bonus," said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm . . . Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.Of course, one could ask why making $500,000 in 2009 would hurt Kenneth D. Lewis of Bank of America given that he "took home more than $20 million in 2007. " Of course, $500,000 might not be enough for Lewis if he treated his personal finances like he did the bank's and leveraged himself to the hilt.
I have to admit that I have limited sympathy for someone who can't manage himself on $20.5 million of income in three years.
It would also be interesting to see which big banks would hire Lewis for more than $500,000 given that practically all of them are taking TARP money and therefore subject to the same salary limitations.
In the same way, the Times article mentions that Rick Waggoner of GM made $1.6 mill in 2007 and therefore would have to take a 66% salary cut.
Given the enormity of GM's losses that's hardly unreasonable.
But let's say that Waggoner just can't do with less than $1.5 million. What company would he go to as an alternative--Chrysler, Ford.
I don't think so.
What about Toyota? Toyota is the biggest car company in the world. Well, Toyota CEO Katsuaki Watanabi made $900,000 in 2007 for a company that did a hell of a lot better than General Motors with Waggoner making almost 15 times Watanabi's salary.
And Watanabi is in line for a salary cut this year after Toyota lost money.
It doesn't seem that big business in Japan is as eager to reward failure as business in the U. S.
I'm glad to see Obama do this. If the American financial sector is going to survive, it needs to get out of the super-speculative, get filthy rich, lord of the universe mentality.
Being forced to subsist on $500,000 a year will help encourage financial executives to develop another mind-set.