Restructure Compensation?

Discussion in 'Economy' started by Indiana Oracle, Mar 21, 2009.

  1. Indiana Oracle

    Indiana Oracle The Truth is Hard to Find

    Mar 17, 2009
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    NW Indiana
    Would like to put a somewhat out-of-the box idea forward for comment. It is antithetical to some of our free market concepts (I am a confirmed capitalist, btw). But this is not an agenda piece founded on either politics, social theory, economic theory, populism, or emotive impulses.

    I recognize that this idea begs many questions. I am convinced, however, that it should not be dropped from consideration solely on that basis.

    Limiting compensation among most +$1m earners is potentially a good thing for society.

    Due to a number of social, political, and psychological reasons, there are a number of people making a great deal of money speculating with or investing other people’s money (investment bankers, turnaround CEOs, derivative traders, etc.).

    These individuals are considered by companies which service people and institutions of high net wealth, as being in scarce supply under circumstances of high demand. Largely true.

    There are also plenty of other individuals doing the same thing for smaller companies, whose annual compensation is probably above $250k/year, but not in the millions. Generally speaking these are the people most involved in the wealth generation and security of the 55% of America invested in the stock market.

    All of us on bonus plans, do well as we and our companies succeed. We can improve our life circumstances, but seldom do we become rich on that basis. Does that make it wrong for others to make millions? In principle, no.

    For example, starting a company should not be discouraged by capping potential future income. If you are a professional athlete you have a short period of time to make your life’s income. If you are a specialist physician in high-demand there are likely few of you. If you came by wealth through inheritance, you should not be penalized. There are many such circumstances.

    However, there are circumstances of obvious unreasonableness. We have seen examples of these since the early 90’s. Golden Parachute is something nearly everyone is familiar with, to name one. More recently, high-end financial people have come under scrutiny, because they not only failed, but their acts over the past decade are a very large part of why this downturn is extreme and so hard to fix.

    It is not uncommon for this group and top business leaders to be plus-compensated when they individually succeeded but their company did not. They are also often compensated for success even if their approaches failed. These are not reasonable circumstances for plus-compensation of any notable amount.

    If plus-compensation for the high-income people were to be capped or restricted, there would be some fallout. For example, there could be a major real estate upheaval in some areas of the country such as NYC and southern CT, within the structures of some companies, and within a sliver of our society. Some art galleries would go out of business, the private aircraft industry might suffer, university endowments may decline, certainly NYC and federal tax revenues would fall, etc.

    Sorry, but in the bigger scheme of things, I have to ask because I have had enough of this, so what?

    Lastly, the big counter question…who decides? As a Capitalist and Plato Republicanist, I do not believe there should be a salary administration in the Washington snake pit. It may, however, be perfectly reasonable and even achievable to establish rules which justify when a mega salary is allowable and when it is not.
    Last edited: Mar 21, 2009
  2. neurosport

    neurosport BANNED

    Mar 19, 2009
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    Brooklyn, NY
    let them have their bonuses. if the system rewards rewards failure then the system itself is a failure. treating symptoms won't get you far.

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