Comments on: Don’t cap CEO pay, cap government coercion http://blog.aynrandcenter.org/dont-cap-ceo-pay-cap-government-coercion/ Mon, 24 Oct 2011 16:44:58 +0000 hourly 1 By: Charles Humprhey http://blog.aynrandcenter.org/dont-cap-ceo-pay-cap-government-coercion/comment-page-1/#comment-130 Charles Humprhey Mon, 02 Mar 2009 19:16:51 +0000 http://blog.aynrandcenter.org/?p=631#comment-130 However, if the government becomes a major stockholder or lender [as per terms of an agreed contract], it does have the 'right' to subject the CEO and others to the terms of the lender's contract or the majority vote of the stockholders! Moral: don't ask or allow the gov. for assistance. Be your own person. Don't allow the gov. into your tent. Charlie. However, if the government becomes a major stockholder or lender [as per terms of an agreed contract], it does have the ‘right’ to subject the CEO and others to the terms of the lender’s contract or the majority vote of the stockholders! Moral: don’t ask or allow the gov. for assistance. Be your own person. Don’t allow the gov. into your tent. Charlie.

]]> By: David DeZan http://blog.aynrandcenter.org/dont-cap-ceo-pay-cap-government-coercion/comment-page-1/#comment-107 David DeZan Tue, 24 Feb 2009 19:48:48 +0000 http://blog.aynrandcenter.org/?p=631#comment-107 Dear Don, There are many problems with our corporate value system. First off, I believe that with a few exceptions (like Bill Gates, Warren Buffet, Andy Grove, Jack Welch and the like) most CEOs do not earn or deserve their exceptionally high pay. This is because they have created nothing. They simply sit on the shoulders of titans that built the companies they now run. Here is where objectivism fails to provide the correct path of action. If you are the CEO of a large company, doing what's best for you (e.g., getting the highest pay and bonuses) may hurt (or at best not help) the company you are working for. Therefore, you must work in manner that best benefits the collective (in this case the company) in order to benefit yourself (but probably not in the short term). CEOs of large corporations don't tend to think like that. They try to maximize their own benefits without regard to the health of the whole company. Second, you point out that the CEO should get paid whatever the shareholders judge will be best. I agree, however, that is not the case. The CEO is paid whatever is agreed upon by the board of directors. Typically, the board is made up of friends and long time colleagues of the CEO. They tend to give them as much as they want. There again we see that these people are rewarded not for their innovation, intelligence and vision but rather their connections. What we need to do is to have the shareholders vote on compensation packages designed by the board. It's silly to say that the top 5 highest paid executives can't earn more than the President of the United States (to set a limit) at Citigroup, most managers over the third or fourth tier of management earns more than $500k annually. Third, there is no need for government ownership in this crisis. The government needs to setup a resolution trust company (like it did in the 1980's) and let them buy up toxic assets. The asset holders will lose some money but not as much if they kept the assets. If the government buys the banks, they will just own the toxic assets outright and it will still stink up the balance sheets of the banks. We then need to re-institute the Glass-Steagal act and separate investment banking from commercial (retail) banking. We also need to break up banks that are "too big to fail". Anything that is too big to fail is also too big to exist as is. Fourth, allow the American people to finance this mess by buying bonds, just like in WWII. They should be long term (10 year) and pay better then the current savings account interest rate. Dave DeZan Dear Don,

There are many problems with our corporate value system.

First off, I believe that with a few exceptions (like Bill Gates, Warren Buffet, Andy Grove, Jack Welch and the like) most CEOs do not earn or deserve their exceptionally high pay. This is because they have created nothing. They simply sit on the shoulders of titans that built the companies they now run. Here is where objectivism fails to provide the correct path of action. If you are the CEO of a large company, doing what’s best for you (e.g., getting the highest pay and bonuses) may hurt (or at best not help) the company you are working for. Therefore, you must work in manner that best benefits the collective (in this case the company) in order to benefit yourself (but probably not in the short term). CEOs of large corporations don’t tend to think like that. They try to maximize their own benefits without regard to the health of the whole company.

Second, you point out that the CEO should get paid whatever the shareholders judge will be best. I agree, however, that is not the case. The CEO is paid whatever is agreed upon by the board of directors. Typically, the board is made up of friends and long time colleagues of the CEO. They tend to give them as much as they want. There again we see that these people are rewarded not for their innovation, intelligence and vision but rather their connections. What we need to do is to have the shareholders vote on compensation packages designed by the board. It’s silly to say that the top 5 highest paid executives can’t earn more than the President of the United States (to set a limit) at Citigroup, most managers over the third or fourth tier of management earns more than $500k annually.

Third, there is no need for government ownership in this crisis. The government needs to setup a resolution trust company (like it did in the 1980′s) and let them buy up toxic assets. The asset holders will lose some money but not as much if they kept the assets. If the government buys the banks, they will just own the toxic assets outright and it will still stink up the balance sheets of the banks. We then need to re-institute the Glass-Steagal act and separate investment banking from commercial (retail) banking. We also need to break up banks that are “too big to fail”. Anything that is too big to fail is also too big to exist as is.

Fourth, allow the American people to finance this mess by buying bonds, just like in WWII. They should be long term (10 year) and pay better then the current savings account interest rate.

Dave DeZan

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