Pay Cuts at the Top

Under normal circumstances, we would be opposed on principle to the idea of the federal government dictating what some of the nation's largest companies should pay their executives. It's none of the government's business what the employee and employer agree to by way of compensation.

Look around. These are not normal circumstances.

The exception to the aforementioned principle are companies that receive hundreds of billions of dollars in taxpayer-provided bailout funds. When the companies took that money, they also accepted the strings that come with it. If this is unacceptable, the firms should give the billions back. But as long as they hold onto those funds, the executives who lead these companies should not be surprised that the public is scrutinizing business practices and eager to set limits on executive compensation.

The Obama administration is heeding that call by demanding steep pay cuts for executives at top firms. Kenneth Feinberg, the so-called "pay czar" appointed by the Treasury Department, is targeting the seven companies that took the largest sums of bailout money — Citigroup, Bank of America, General Motors, Chrysler, American International Group, Chrysler Financial and GMAC. Feinberg is ordering a 50 percent cut in total compensation from last year for the 25 highest-paid employees at each of these firms.

Feinberg also urges companies to pay 90 percent of executive pay — which amounts to primarily cash bonuses — in the form of stock. That way, when it comes to bonuses, the employee does well only when the company does well.

What a concept. Another thing that really irks average Americans is that Wall Street has a knack for lavishly rewarding incompetence and failure. On Main Street, if a company doesn't perform well, it goes out of business and the people who work there wind up unemployed. On Wall Street, if a company deemed too-big-to-fail doesn't perform well, it gets propped up by the government.

It is no wonder that the American people are steamed at the bailout companies and eager to rein in executive compensation. The accurate perception is that these firms just don't play by the same rules that everyone else does.

During an interview with CNN this week, Feinberg argued that, in effect, the American people now own these companies and have the absolute right to help decide how they are run.

We needn't go too far. It's a safe bet that the last thing that most Americans want is for the government to run these companies in perpetuity. It's also a safe bet that most taxpaying Americans want their taxes spent wisely.

When that doesn't happen, it's the job of the federal government to correct abuses.

REPRINTED FROM THE SAN DIEGO UNION-TRIBUNE.

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