The Punisher

The March of Progress continues. The "Compensation Czar" (nee' Kenneth Feinberg) hath sent his heralds out among the townships and villages of the Kingdom to proclaim steep cuts in pay for the top 25 executives at some (but not all!) of the firms that have received money during the Age of Bailouts: US To Order Pay Cuts At 7 Companies With Bailout Aid

Responding to the furor over executive pay at companies bailed out with taxpayer money, the Obama administration will order the firms that received the most aid to slash compensation to their highest-paid employees, an official involved in the decision said on Wednesday.

The plan, for the 25 top earners at seven companies that received exceptional help, will on average cut total compensation this year by about 50 percent. The companies areCitigroup, Bank of America, American International Group, General Motors, Chrysler and the financing arms of the two automakers.

Before getting to the "conservative" portion of this post, I would like to point out that if you were a top executive at Citigroup, B of A, AIG, GM, or Chrysler, you ought to have either submitted your resignation or been fired the minute your firm received bailout money. Maybe these guys are getting a pay-cut now, but they really should have gotten a 100% cut in pay a year ago.

Nonetheless, this is a terrible idea, whatever public anger the pay czar might think he is assuaging. The pay-cuts are actually aimed at the 25 highest earners at the affected companies. That doesn't necessarily mean the 25 people at the top of the totem pole are at the receiving end of the pay czar's green eyeshade act. Not sure how these firms are going to earn their way back to prosperity when they can't pay as much as their rivals for talent. Also, there's the problem of misdirection. The pay-cuts seem to be driven, in part, to distract from bonus outrage against other TARP firms. We are assured that there is "outrage" over the bonuses earned over at Goldman, but - consarn it! - Goldman is out of reach:

(The pay plan) would have no direct impact on firms that did not receive government bailouts or that have already repaid loans they received from Washington. Therefore, it is unclear how much effect, if any, the plan will have on the broader issues relating to executive compensation, income inequality and the populist animosity toward Wall Street and corporate America.

Free Will's attitude is the government - especially a "czar" last seen deciding how much compensation 9/11 survivors would receive - should not be in the business of settling issues related to executive compensation and income inequality. For one thing, it is highly likely that the guys getting their pay cut managed to pull themselves up from humble, or at least middle class, beginnings. Is is really an "income inequality" problem when someone works hard and makes the most of his opportunities?

Also, if we're worrying about income inequality, how about all of those UAW members? GM didn't go under because Rick Wagoner was making too much money, but because the employees were (plus there were too many of them, and they could not be easily laid off). If you want a pure example of income inequality, look at the difference in pay between UAW members and non-union auto workers. It's the exact same work, yet the UAW guys famously earn much more. Where's the pay-cut for them?