Executive Wage Controls

President Obama is said to be seriously considering rules that would seek to impose a $500,000 a year salary cap on executives whose firms receive government financial rescue funds. The rules are expected to be announced next week as part of a plan to spend the remaining TARP funds.

I reserve the right to reverse course once I see the complete details of the rules, but based upon the preliminary details, I’m a’gin it. The same argument that has been made to me about congressional pay (enticing the “best and brightest” to public service and all that) applies here. No one batted an eyelash when these executives were at the helm of institutions that were returning 20% on investment five years ago. And considering bad governmental policy and lax oversight are at the heart of the current mess, this strikes me as a bit hypocritical on the part of Congress.

How so? Take a look at these congressional perks, courtesy of the National Taxpayers Union:

- Pension benefits that are two to three times more generous than those offered in the private sector for similarly-salaried executives. Taxpayers directly cover at least 80 percent of this costly plan. Congressional pensions are also inflation-protected, a feature that fewer than 1 in 10 private plans offer.

- Health and life insurance, approximately 3/4 and 1/3 of whose costs, respectively, are subsidized by taxpayers.

- Wheeled perks, including limousines for senior Members, prized parking spaces on Capitol Hill, and choice spots at Washington's two major airports.

- Travel to far-flung destinations as well as to home states and districts. Despite recent attempts to toughen gift and travel rules, "junkets" are still readily available prerogatives for many Members.

- A wide range of smaller perks that have defied reform efforts, from cut-rate health clubs to fine furnishings.

If we're doing the whole Bolshevik thing here, we ought to go full-bore. I look forward to Obama’s plan to address these inequities.

Look, if you don’t like what the CEO of CitiGroup or whatever it’s called this morning makes, then don’t invest in it. Information on executive compensation is widely available to investors; in fact, executive pay is often put before shareholders vote.

But governmental intrusion and wage controls will only exacerbate the problem by attracting less qualified applicants to head these institutions “too big to fail”. They also amount to the classic slippery slope argument. What’s next, capping salaries for surgeons and other medical professionals – do you really want to go under the knife of a guy who suddenly makes minimum wage?