Monday, March 16, 2009

Talk about missing the point!

It seems to me much of the criticism about executive compensation has been misplaced.

What's supposed to be so horrible about CEO's getting big bonuses?
  • "They just don't get it."
  • "They're idiots."
  • "They don't understand that people are hurting and angry."
  • "They're insensitive to public perceptions."
That might be true. But is that really the problem? Is that what's important -- whether or not CEO's know or care what we think?
  • "They don't deserve it."
  • "It's rewarding failure."
OK, imagine this... Suppose that certain executives at these companies had been working really hard, doing their best, etc., etc. And let's even suppose they're not the people who had made bad decisions, but they are doing their darndest to repair the damage. And suppose we had good evidence that, if it weren't for their work, things would be much worse. Given the circumstances, they might be described as moderately successful in their endeavors. Even if this were the case, how would you feel if millions of taxpayer dollars that was intended to help save their companies was used to give them bonuses instead? Myself, personally, would still not be happy about it. (I find it implausible that the bonuses, in the current environment, actually help the company be more profitable.)

On the other hand, suppose that a private company that has taken no bailout money decides to give a reckless and irresponsible exectutive a multi-million dollar bonus that he doesn't deserve. This might be a bad idea for many reasons. It will probably be bad for the company, and in turn, bad for everyone who depends on that company. But, hey, if they want to shoot themselves in the foot, that's more or less their problem. Investors and other people who depend on this company should be aware and take caution. If such practices are harmful to companies, companies that are determined to engage in them should fail.

In sum:
Bonuses for well-meaning, "deserving" executives for bailed out companies -- Grrr!
Bonuses for reckless, undeserving executives for private (un-bailed-out) companies -- Oh well.

Ergo: The executives' being undeserving is irrelevant to how bad an idea the bonuses are!

So why are the bonuses so horrible? In my opinion, it's because they constitute the transfer of vast sums of wealth from millions of Americans who can't afford it to a privileged few, which serves no other purpose than the interests of the few (who also happen to have been a lot better off in the first place).

Who cares what they do or don't understand, what their motives are, or what they do or do not deserve? I don't.

This has got to be the biggest rip-off perpetrated against the American people in the history of our country. And all people can complain about is that the beneficiaries of this scam are insensitive and undeserving?!

But if we stop talking about the character flaws of CEO's, we'll have to start talking about the people who just handed them billions of dollars that we don't even have. I mean, it's not as if they broke into Fort Knox and stole it.
  • "This is a red herring. It's such a small percentage of the bailout (or TARP or whatever) money. Complaining about it is great political theater, but in the big picture, the bonuses are irrelevant."
OK. Here's how to get away with wasting a billion dollars: First, spend a trillion dollars. Then, when someone asks about how a billion of it was spent, point out that that that is only .1% of the total. (Recall that the same kind of response was made in defense of various parts of the stimulus package. It is so huge that to complain about multi-billion dollar expenditures looks like knit-picking.)

The sums of money here are just beyond my comprehension. But I'm not supposed to worry about amounts that are far more than I could earn in 10 lifetimes, because it's a drop in the bucket of what the U.S. taxpayers are on the hook for. And this is supposed to make me feel better why?


Anonymous said...
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Anonymous said...

Nice post.

It's realy annoying to me how people usualy see government, as a big daddy who can give presents to the good children and punish the bad ones. I think that much of the misplacing in the criticism government policys get is an efect of this distorted view most people have. It's like, "I don't like CEO's, they don't deserve Dad's consideration". It's a personal view of the state wich takes the legitimacy of it as implicit.

People doesn't even bother with the fact that the state realy takes money from X and give to Y. All they criticism resides in the fact that they want to be Y,if they can. They want to be the good child who gets presents.

Anyway, I don't know if that's a annalisys which fits the political scenario up there, in the States. But it's certainly what I feel when I watch the political debates down here in South America, and I simply hate this personalist view of the State and the paternalist view of government issues.

whittaker said...


You make good points here, but I also think you're proving the opposite of what you intend. The bonuses ARE a drop in the bucket, so you should set your sights higher. If you're going to complain, use your energy more productively: complain about trillions, not billions.

Anonymous said...

Hey Wittaker,
Why don't you use your energy more productively than criticizing what people complain about on their blogs.