Pay Czar Economics
Under capitalism, people are free to earn whatever they can. Compensation creates incentive, which drives innovation, which spawns investment or re-investment, which fuels further compensation. Some people get paid more than others, and some get paid for jobs that they didn't do very well. Is it right? That's for courts to decide, because most of these compensation packages are in contracts. The government generally does not have the power to break contracts, unless you are the current Congress or President Obama. Beginning in the last few months of the Bush administration, banks were forced to take money from the government to prop up companies that should have failed. Obama's Pay Czar now wants to limit compensation for those in the "bailed out" companies. Without compensation, companies cannot attract top talent. But the CEOs make so much, it isn't fair! Let's take a look at CEO compensation:
CEO Pay and Corporate Costs, 2004
CEO Pay as a Share of
CEO Pay Sales Market Cap Net Income Sales Market Cap Net Income
$6.9 billion $8.1 trillion $12.0 trillion $552 billion 0.09% 0.06% 1.3%
Source:WatsonWyattWorldwide data.
Notes: The sample is 1,398 U.S. corporations. CEO Pay includes salary plus bonus plus stock options exercised plus
long-term incentive payouts. Market Cap means market capitalization.
Source: Cate Institute
The enemy here is not CEOs who make oodles of money. A few bad apples have spoiled the lot so CEO pay becomes a lightning rod in the political world. Because these companies received government money, the government gets to dictate what people get paid, how they produce their product and what to produce - GM, Chrysler, banks, etc.
What about Microsoft? They receive government money either through subsidies or selling their product. It's not like the government has much of a choice whether they want to use a Microsoft product because even if they use Macs, they most likely will still use MS Office to do their paper work. Bill Gates is one of the richest men in the world. Since he receives government money, should his compensation be limited also? Why not? Why do some companies that receive government money get regulated and others not? Why is there no outrage about how much Bill Gates makes or is worth?
The real issue here is not how much someone makes, right or wrong. The problem and most serious issue is where is the courts in all of this mess? Why aren't courts striking these actions as unconstitutional? Limiting compensation and even the existence of a Pay Czar with power over business - WITHOUT BEING VETTED BY CONGRESS - is a gross misinterpretation of the commerce clause in the Constitution by the Bush and Obama administrations, and the US Congress. The economy trumps the Constitution now? The power of the federal government has expanded far past it's enumerated powers. Is there no judge with the guts to rule this stuff unconstitutional? Justice Ginsberg had an opportunity to rule the Chrysler dismantling as unconstitutional but she decided to let it slide. We have czars that have power over regulation, the economy and our lives but yet Congress sits idly by and lets it happen. This is nothing more than a huge expansion of the executive and legislative powers over private industry and private citizens. Thomas Jefferson must be rolling over in his grave.
Look back to history - 1929 though 1940 - and see how government manipulation of market forces effected the economy. Do we really want to repeat those mistakes?
CEO Pay and Corporate Costs, 2004
CEO Pay as a Share of
CEO Pay Sales Market Cap Net Income Sales Market Cap Net Income
$6.9 billion $8.1 trillion $12.0 trillion $552 billion 0.09% 0.06% 1.3%
Source:WatsonWyattWorldwide data.
Notes: The sample is 1,398 U.S. corporations. CEO Pay includes salary plus bonus plus stock options exercised plus
long-term incentive payouts. Market Cap means market capitalization.
Source: Cate Institute
The enemy here is not CEOs who make oodles of money. A few bad apples have spoiled the lot so CEO pay becomes a lightning rod in the political world. Because these companies received government money, the government gets to dictate what people get paid, how they produce their product and what to produce - GM, Chrysler, banks, etc.
What about Microsoft? They receive government money either through subsidies or selling their product. It's not like the government has much of a choice whether they want to use a Microsoft product because even if they use Macs, they most likely will still use MS Office to do their paper work. Bill Gates is one of the richest men in the world. Since he receives government money, should his compensation be limited also? Why not? Why do some companies that receive government money get regulated and others not? Why is there no outrage about how much Bill Gates makes or is worth?
The real issue here is not how much someone makes, right or wrong. The problem and most serious issue is where is the courts in all of this mess? Why aren't courts striking these actions as unconstitutional? Limiting compensation and even the existence of a Pay Czar with power over business - WITHOUT BEING VETTED BY CONGRESS - is a gross misinterpretation of the commerce clause in the Constitution by the Bush and Obama administrations, and the US Congress. The economy trumps the Constitution now? The power of the federal government has expanded far past it's enumerated powers. Is there no judge with the guts to rule this stuff unconstitutional? Justice Ginsberg had an opportunity to rule the Chrysler dismantling as unconstitutional but she decided to let it slide. We have czars that have power over regulation, the economy and our lives but yet Congress sits idly by and lets it happen. This is nothing more than a huge expansion of the executive and legislative powers over private industry and private citizens. Thomas Jefferson must be rolling over in his grave.
Look back to history - 1929 though 1940 - and see how government manipulation of market forces effected the economy. Do we really want to repeat those mistakes?
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