INSTANT VIEW: President Obama's executive compensation plan [analyst comments]

Reuters ^ | 2/4/09

[freespirited]

The following are comments from the market on the new plan:

LAUREN SMITH, BRUYETTE & WOODS

"There is certainly a possibility" of talent flight from the big firms to the smaller investment banks ...

MARK POERIO, PARTNER, LAW FIRM PAUL HASTINGS

"I think it is going to warp the talent pool ... If you have someone who was making well over $1 million, and now they are capped at $500,000, it is very conceivable that they are going to look to go to a company not subject to those limitations.

DAVID KOTOK, CIO AT CUMBERLAND

"This is pure political grandstanding. If the limit has bite, ...the unintended consequences will hurt the US as skilled and bright senior managers make choices.

"If the limits have loopholes, they are a sham. Industrial policies fail. So will this one."

HOUSE REPUBLICAN LEADER JOHN BOEHNER

"..if anybody is looking to the taxpayer to help bail their company out, these kind of executive compensation limits are appropriate."

REP. MIKE PENCE, INDIANA REPUBLICAN

"I would say to Wall Street, be careful what you wish for. ... American business -- there is a cost when you invite the 800 pound gorilla of government into your boardroom."

MICHAEL HOLLAND, FOUNDER OF HOLLAND & CO,

"It's the movement of the financial capital from New York to Washington. .. "I would say it's at least a stealth nationalization. "

JOHN O'BRIEN, MKM PARTNERS, CLEVELAND

"That could really affect a lot of talent at some of these financial institutions. ... if I was a senior level executive and had a choice to go to public company or a private company, I would go private.

PETER MORICI, UNIVERSITY OF MARYLAND,

"There are loopholes in this: basically the stock options loophole and the fact that it only applies to top executives. "

[thefrankbaum]

The analysts are right, but Mike Pence’s statement demonstrates the soundest advice.

[caseinpoint]

Short-sighted. I can almost (not not quite) see limiting bonuses and stock options but to impose a sudden limit on contractual compensation (and interfering with contracts is, I think, supposed to be unconstitutional) is a bad move. People base their lifestyles on guaranteed income. Seeing as how governments can’t suddenly adjust their “lifestyles” to decreased income, I don’t see how they can dictate to individuals that they must give up guaranteed income.

[livius]

That's true, and I think Holland's analysis is the best:"It's the movement of the financial capital from New York to Washington. .. "I would say it's at least a stealth nationalization. "

[org.whodat]

Who cares what the fellow crooks on wall street have to say!!! Now if they need money, they could consider honorable way out. The jumped in the old days.

[KarlInOhio]

You're going to get people who are skilled at running a twenty branch regional bank and want to take a step up taking the job of running banks which the US government has stated are too big for the economy to fail without bringing down the entire US banking system. If they survive they'll be able to take a step up in pay with a 200 branch regional bank.

Do I like the millions people got for running banks into the ground? No. But you won't be getting the best and brightest at running banks at the lower than market pay. That plan is destined to fail. If Obama puts it through, it would make more sense to just kill those big banks and sell off their assets.

[KarlInOhio]

"It's the movement of the financial capital from New York to Washington. .. "I would say it's at least a stealth nationalization. "

As stealthy as a flight of B-52s.

[voveo]

Don't put any limits on pay or bonuses, that would cause the institutions to fail as the upper management leaves for better pay elsewhere.
If Government wants to control pay, link it directly to performance. Tie their pay to the defined charter of the corporation with an agreed upon formula. While we're at it let's also do that to congress. They should get 3x the average pay of their constituents. If they want a pay raise, make sure the people they represent get one as well.

[PJammers]

Like I said on another thread. I’ll take the job. It’s over five time what I make a year, plus since it’s a gubmint job I don’t have to do it well. Waygu steak anyone?

[ryan71]

Slobama will insert Socialist policy whenever there is an opportunity.

[businessprofessor]

I think that we should apply these limits to every organization that has its hands out. The entertainment industry with the new provision for special tax breaks should be first in line. Let’s limit the outrageous compensation of top entertainers to the same standard as CEOs. Their performance will be connected to the box office and critics approval. Professional sports, especially teams using tax revenues for stadiums, should be targeted. The list of other industries is almost endless now. Welcome to government control!

[pgkdan]

REP. MIKE PENCE, INDIANA REPUBLICAN
"I would say to Wall Street, be careful what you wish for. ... American business -- there is a cost when you invite the 800 pound gorilla of government into your boardroom."

Right on. Any company that needs to come to the taxpayer with it's hat in it's hands begging for public funds to stay in business has absolutely no business giving bonuses to anybody!

Anyone who asked me for a bonus in a year that we haven't made a profit would be fired for their sheer stupidity.

[muawiyah]

Currently the "market" for top notch bankers is severely depressed.

It would be foolish for the government to keep paying high salaries to the failed managers in the failed banks it has acquired when there are much more highly talented people on the street ready to take their place for less pay.

It's a simple business proposition, and it's time to exercise the option.

[freespirited]

Like I said on another thread. I’ll take the job. It’s over five time what I make a year, plus since it’s a gubmint job I don’t have to do it well.

LOL. Feel free to use me as a reference.

[Lockbox]

Why stop with the TARP Funds?

What about limits when other government funding is provided. I can think of the stadiums built with tax payer funding. We need to pay athletes only $500,000.

Also maybe industries which receive tax breaks such as the movie industry. So movie stars now can only earn $500,000.

Welcome to the new America!

[theknuckler_33]

“In ordinary situations where the taxpayers’ money is not involved, we shouldn’t set executive pay,” said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.

“But where you’ve got federal money involved, taxpayers’ money involved, TARP money involved, and the way they have spent it, with no accountability, is getting close to being criminal.”

[theknuckler_33]

Like I said on another thread. I’ll take the job. It’s over five time what I make a year, plus since it’s a gubmint job I don’t have to do it well. They didn't do their jobs well to begin with. If limiting the salary of someone who did a bad job is bad business, it'll be the first I've heard of it.

[Lockbox]

and don’t forget former politicians, need to limit them to only $500,000 per year earnings, right Bill!

[montanajoe]

If these guys don't want to be working for “peanuts” maybe they should start managing their companies in a way that avoids government handouts.

If a company needs a government hand out maybe not being able to keep its “top” talent is a good thing.

[theknuckler_33]

What about limits when other government funding is provided. I can think of the stadiums built with tax payer funding. We need to pay athletes only $500,000. Also maybe industries which receive tax breaks such as the movie industry. So movie stars now can only earn $500,000.

This doesn't make any sense. The players don't own the stadium. No tax money goes to player salaries. And actors don't get any of the tax breaks you are talking about either... the studios get them.