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Atlas Twitched?

In effort to stem public outcry the government today announced that they were limiting the salaries of the top 175 executives for companies that have received federal bailout money.

Will this be the event that causes the best and brightest our country has to stop being exactly what we need in this time of economic strife? Will the best and brightest stay with the companies that so need their talents for a fraction of what they could earn on the free market OR will they do what capitalists have done previously? Will they leave for bigger paydays and more options to earn what the market will bear? I am betting that the majority will follow the opportunities that present themselves in the form of job offers from companies that are in better financial shape and can offer a better financial package. Perhaps one without government run healthcare too. The companies that are in trouble will be forced to struggle with 2nd tier talent to help guide them through the upcoming months. I also predict that we might see a company fail as a direct result of this short sighted action.

This to me seems like the first step towards the very thing that Ayn Rand described in Atlas Shrugged. The thought that this might actually become something other than a work of fiction scares me. What will be next? Will I have to share my commissions with agents who are not working because I am making too much money (A guy can dream now right?) Will our countries talent be wooed by other countries that need our intellectual capital to continue to grow?

While it is disheartening to see reports that the bailout money was used on executive pay and bonuses it is even more troubling to see that our government has decided to step in and force businesses to act and think like government agencies.

Today is a very sad day for the cornerstone of America our capitalistic system.

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  • 22 comments

    22 Comments so far

    1. Ashlee October 22nd, 2009 6:42 pm

      I think it is very sad that the companies used the bailout money to pay the higher up executives. Maybe they deserved the money, maybe they didn’t. They should have looked at the economic situation and thought harder about it. Maybe they should have taken a pay cut and then made up for it later. Now with the government stepping in, it makes me even more scared!

    2. Missy Caulk October 22nd, 2009 7:06 pm

      Scott, my thought exactly as I heard this…but I am not surprised as I knew when the Government fired Rick Wagoner of GM.

      Good CEO or not…that was when I knew…if they did it once they can do it again.

      It is now high time for the people of this country to explicitly declare whether they will be free men or slaves. It is an important question which aught to be decided. It concerns more than anything in this life. The salvation of our souls is interested in this event. For wherever tyranny is established, immorality of every kind comes in like a torrent, it is in the interest of tyrants to reduce the people to ignorance and vice – Samuel Adams Oct 5 1772.

    3. Russell Shaw October 22nd, 2009 9:36 pm

      Scott,

      As much as I agree with your overall views regarding Ayn Rand, it is hard to believe that companies that were being run by the “best and brightest” would ever need or take bailout money.

      Your pay actually IS determined by how effective you are at doing your job. Not so with high level executives at public corporations. To my knowledge, every study ever done on publicly held companies has concluded the exact opposite: that actual executive performance and executive pay had very little in the way of a direct relationship.

      In some instances, these people took taxpayer dollars and then paid huge bonuses to executives who had accomplished nothing but to lose money for their company. If they were going to be paid on their performance – in every instance they would not have received any bonus but would have received a pay cut.

    4. Thomas Johnson October 22nd, 2009 9:56 pm

      While the brass at AIG is being vilified, the taxpayer bailout cash is indemnifying credit default swaps to which Goldman Sachs is a major counter party, so the bailout money has become a direct pass through to Geithner’s former employer and is funding their obscene bonus pool. The looting of America under Obama continues.

    5. Kevin Schmidtchen October 23rd, 2009 1:25 am

      I don’t think this is such a “SAD” day. Sad days were every day the last 15-24 months and what has happened to a lot of normal people in this country. Those are sad days.

      The best and the brightest will continue to “succeed” in their own ways. I am not worried about them if you are simply talking about $$ as being the main succesful benchmark.

      Maybe we should even look at what this means…the best and the brightest…are these people that you are referring to the ones who screwed up in huge ways with their “bets”?

      Change is hard, but it is a reality that change is needed. No one has the golden answer, but obviously what had been going on was not working.

    6. Bob Hunter October 23rd, 2009 6:58 am

      Scott, it’s not quite as black and white as you make it out to be. If successful capitalism results in an ever smaller percantage of Americans holding an ever larger percentage of the wealth, then the system will fail on it’s own.
      It is hard for me to see how de-regulation, as in repeal of Glass-Steagall in 1999 has helped the middle and lower econmic classes. The largest transfer of wealth in human history has occurred in the last 10-20 years.

    7. Greg Swann October 23rd, 2009 7:48 am

      > If successful capitalism results in an ever smaller percentage of Americans holding an ever larger percentage of the wealth, then the system will fail on it’s own.

      But this is the opposite of what happens in actual free markets. For anyone to dominate any sort of market, force is required. When someone tries to use market forces to “corner” a market, the market punishes that person with dispatch. The most recent episode I can think of is the Hunt Brothers attempt to put a corner on silver. As prices rose, marginal silver mines reopened and every granny in god’s country sold her silverware. Market forces would have crushed the Hunt Brothers, so, of course, the Kleptocrats who run our financial system rescued them instead. Incidentally, we are seeing the same sorts of marginal resources being applied to the gold market right now. The idea of static wealth is hugely erroneous at the margins.

      > It is hard for me to see how de-regulation, as in repeal of Glass-Steagall in 1999 has helped the middle and lower economic classes.

      Cutting only one of the ropes binding Gulliver is not deregulation. But, if we only get to cut one, my vote is for the Sixteenth Amendment. That would make a huge difference for everyone — especially federal dependents.

      > The largest transfer of wealth in human history has occurred in the last 10-20 years.

      If transfer means destruction, this is plausible, but, it doesn’t really matter. Your complaint is not with capitalism but with Rotarian Socialism — government by, for and for the benefit of pressure groups.

      In support of Scott’s argument, as much as I hate the game of patty-cake that goes on between Washington and Wall Street, the abrogation of contracts is an outrage. Unprecedented until Obama took office, it is by now becoming commonplace. This will not have happy consequences.

    8. Jeff Brown October 23rd, 2009 8:29 am

      Government doesn’t create success, it lives off of success — at the point of a gun.

    9. Genuine Chris Johnosn October 23rd, 2009 9:02 am

      The best and the brightest were never CEOs of established companies. The skills required to rise were different from the skills reuqired to run a company. There has been an air of entitlement from every high level executive I have met. Less production more guarding your position.

      I have no tolerance for the governments actions with AIG and other companies, but middle aged middle managers are fungible. The mediocrities that have run companies have been given perverse incentives all the way around so that the government DOES have to step in .

    10. bob hunter October 23rd, 2009 9:30 am

      Greg, I’m not arguing against capitalism, but government set salaries for managers of companies on the government teat is not objectionable to me. These companies should have been allowed to fail. A free market enviroment hardly exists, currently.
      The transfer of wealth that we have seen is detrimental to our society. The middle class back pocket is being systematically picked.
      It appears to me that we are heading towards a system that looks more and more like an oligarchy.

    11. Greg Swann October 23rd, 2009 9:36 am

      > It appears to me that we are heading towards a system that looks more and more like an oligarchy.

      I agree completely.

    12. Al Lorenz October 23rd, 2009 11:18 am

      So, we can see the direction this is heading. If it doesn’t change soon, what are folks’ contingency plans?

    13. Jessica Horton October 23rd, 2009 3:23 pm

      And on the most exalted throne in the world sits nothing but a man’s arse…

    14. James Boyer October 23rd, 2009 3:56 pm

      I can understand the public’s call for this. After all these are some of the very people who substantially helped cause the financial failure. I still believe that as part of reform, senior executives of companies that put the country’s economy at risk, as part of the price for bailing out their company should have to forfeit their entire personal fortune. If they take steps to hid that fortune, Jail them.

    15. jim October 23rd, 2009 6:19 pm

      These “best” and “brightest” are the ones who steered those companies into trouble to begin with. They would have jumped ship a long time ago if there were legitimately better opportunities offered to them. No one wants to work for a struggling company.

      There’s also an oversupply of very talented finance workers who are unemployed. They’re hungry for work and will probably do a better job.

      Good riddance to all that “talent”. I guarantee you they’re going nowhere. They know they’re worthless to other companies.

    16. Don Reedy October 23rd, 2009 9:11 pm

      Scott,

      “Brightest and best…”????

      Ain’t so. Never has been.

      “Craftiest and slickest…”

      Let’s just agree that these words ring truer, and describe those you write about much better.

      Oh, and by the way, once you make this “leap”, it’s easy to see who they are (organized criminals), and how best to deal with them.

    17. Greg Swann October 23rd, 2009 10:37 pm

      > “Craftiest and slickest…”

      The bubbleheads say the same kinds of things about us.

      These people are individuals, and 90+% of them are guilty of nothing except exceeding their performance goals at work. As a people, we err — continuously — by presuming to mind each other’s business. I’m all in favor of getting the state’s nose out of our commercial lives — and I cannot think of a better restraint on economic error than the threat of failure. But we are chortling to ourselves about the cosmic justice of imposing undeserved penalties on people we do not know and cannot possibly have fairly judged simply because, in the opinion of their own employers, they have done superior work over the last year.

      The companies who took TARP money — in many cases were coerced into taking TARP money — are Rotarian Socialists, to be sure, and I would love to see them and thousands of other so-called “businesses” put off the tit at once. But the people who are being hurt by this are just working stiffs who agreed — by contract — to a back-loaded, performance-based pay plan — much like the one we work on. If a “Pay Czar” were to tell us at Close of Escrow that we have been just too crafty and slick to get the money we have earned per the terms of our contract, we might not see the karmic justice of it all.

      Just because the state has thrust us all into the same pigpen, it doesn’t mean we’re obliged to act like swine.

    18. Steve Norris October 24th, 2009 4:08 pm

      If this act by the government stands, how might the administration act in the future? Companies who get government grant money for research could be targets. Companies who utilize government insured financing could be in line. Companies who work on government contracts. If utilizing government money makes you subject to any control those in power want to claim, we’re all screwed.

    19. Greg Swann October 24th, 2009 5:52 pm

      > If utilizing government money makes you subject to any control those in power want to claim, we’re all screwed.

      The Federal Reserve Bank said as much yesterday, implying that they believe they have the power to set salaries for any publicly traded company.

      Is it September 2? “You asked for it, brother!”

    20. Robert Kerr October 25th, 2009 8:44 pm

      This seems to me like the same kind of restriction any private lender attaches to money. Don’t like it, find better terms, either for the loan or employment.

      And let’s clear this up: this is not a last-minute change. These terms were agreed to back when the TARP money was accepted.

      re: Ayn Rand, September 2, etc
      Oh, good grief! Is Ayn Rand on the required reading list for BHB now? ;)

    21. Greg Swann October 25th, 2009 11:36 pm

      > Is Ayn Rand on the required reading list for BHB now?

      A lot of people writing and commenting here are clearly influenced to some degree by “Atlas Shrugged” — now more than ever I expect many would say. YMMV, of course, and we host people with all sorts of points of view. But Rand and Hayek are all through our database, even so.

    22. Michael Cook October 28th, 2009 8:04 am

      I have a different take on the pay curbs. I find it interesting that banks had a culture of rewarding individuals today for taking risks that would last 5+ years. I think its fair to say regardless of how smart and “successful” these bankers were many of these same bankers got us here. Why should they not suffer, in fact, why should they not suffer more?

      While it would have been harsher, the government or the employer should have been allowed to claw back previous bonuses based on accompanying losses. What many of you pro-capitalists are missing is that these same smart people didnt take the losses they earned, but rather socialized the losses.

      Sure, the “smart” people could leave and go to a different firm, but unless employers move to a bonus system that appropriately rewards employees for profits/losses today and tomorrow and five years from now, I cannot find it in my heart to get upset about the slap on the risk these guys are getting today. Call me crazy, but in a free market you take your losses dont you?