This AOL article troubles me greatly. I have questions revolving around this issue for which I have yet heard answers. Perhaps someone can flesh out the details of this for me, or perhaps offer a link that gives more details. But here's where I stand based on my limited knowledge of this story:
First of all, I don't like the idea of bailouts anyway. It's bad enough that, first Bush, and now Obama is doing it in the first place. This is an artificial impediment to the natural course of a free market economy and as such, the results are equally artificial and misleading in judging the effectiveness of either a free market economy, or the policy of bailouts themselves.
As far as daring to impose restrictions on the compensation policies of private enterprises, my first question would be: Are the bonuses or salaries a result of the bailout? In other words, were the execs getting bonuses anyway?
A corporation is an entity unto itself. Though not a person in reality, it is like a person legally in the sense that even the person(s)who founded the corporation is/are empoyees of the corporation as opposed to being self employed. The distinction is a legal one but for reasons of taxation and liability is a great one. Compensation for executives of the corporation is determined by the corps board of directors and shareholders. Generally a contract is approved that spells out the terms of the employment of the exec. Bonuses are generally a result of having met certain pre-determined criteria.
If bailouts are being granted to failing companies, it is the entity known as the corporation that is legally making the request. Or, the execs who petition for the bailout are doing so on behalf of the corporation, and doing so in order to handle its debtload. Salaries and compensations are a part of a corp's debtload. If an incredibly generous bonus is the result of a contracturally spelled out set of criteria that was met by a given exec, an accomplishment that benefits the corp whether it is failing or not, it seems to me that the bonus is a legitimate debt for which the bailout money can be used to satisfy. The compensation package agreed upon at the start of the exec's employment, if a legal contract, is an obligation the corp is required to meet. Just because Barack Obama and hordes of covetous and envious liberals don't like it, doesn't mean they have the right to impose such restrictions if they are supposedly offering a bailout to help the "little guy".
Unless there's something missing in this equation, or unless I've got the whole picture horribly wrong, it seems to me that this type of interference is without question, an action without justification. If the bonuses are given BECAUSE of the bailout, that is, "hey we're gettin' some dough---here's some extra for you!", such restrictions are understandable. But again, the bailout is for the corporate entity, not the employees, including those who run the show.
Can anyone shed more light?
Subscribe to:
Post Comments (Atom)
29 comments:
If you go here, you will read my take on this, as well as see links to stories on it. The limit on executive compensation to which the story refers is the limit imposed on corporations receiving TARP funds. In other words, corporate welfare. If you still have questions, just ask.
So, Geoffrey, to continue from your blog, I still don't have my question answered. I'll make it more basic: Did these execs already have these bonuses coming? If so, then it doesn't matter what one thinks of it, but the bailout money should cover their compensation as well as other corporate debt, since the compensation package is a debt of the corporation. If, and it seemed to be slightly suggested by either one of your links, or a link found on one, the bonuses are for future compensation, then I would say that it is justifiable to tie that bonus to performance related to turning around the corp's troubles and also perhaps repayment of the bail out money.
Keep in mind, however, that I don't favor the bailout anyway, and I definitely don't like the idea of some Democratic know-nothing dictating the wage levels of private industry. Your NPR chucklehead has a lot of sack for suggesting as much as well. Shareholders will sell their shares if they don't like it, but if their share prices continue to rise, and their dividends are regular and also rising, they aren't likely to mind that the people responsible are paid well. Most of this is liberal covetousness and envy. Doesn't look good on anyone.
The bigger question is when did the president of the United States acquire the power to dictate anything to anyone. If P-BO was this concerned about this type of thing he could have exercised the prerogative of his senate seat and amended the bailout bill to prevent these types of bonuses. Had the companies accepted the funds under those terms, I don't think anyone would be complaining, but the democrat congress (who wrote the legislation)(Which gave total control of the entire thing to one unelected official. What the hell were they thinking), and the republican president who signed this piece of crap) had their chance to set the conditions, they failed. So, to unilaterally change the terms on the TARP money was given out, seems somehow inconsistent with our system of government. Why is $500,000 an appropriate amount. Why not $250,000.
Before you both jump down my throat, let me be clear. I find the whole notion of socializing losses as in these bailouts completely wrong. I also believe that the executives who let their corporations into the this condition should get unemployment, not bonuses. But it's not the place of the government in general or the president in particular to make this type of decision.
What's next?
http://women.timesonline.co.uk/tol/life_and_style/women/families/article5627634.ece
This isn't a question of whether or not they have bonuses coming. Since we are speaking here only of those executives whose companies are receiving bailout money from TARP - federal welfare for corporations - it seems to me not unduly burdensome to place strings and other restrictions on that money, including executive compensation. Continuing from my blog, let me just add that since these are companies receiving TARP funds, they are companies that are, for all intents and purposes, bankrupt. These failures lie at the feet of the CEOs. Why should they receive anything at all? Is that difficult to understand? How is either my explanation here, or my reasons for supporting limiting compensation to these doofuses not the point, when it is exactly the point of contention?
Craig, the really bigger question is when did you become so dumb? It's called Administrative law, and it's perfectly legal for the Treasury to set rules and regulations all the time. It's all part of the whole "executing the law" thing that Presidents do.
GKS,
Since that's your response, you obviously didn't read my comment, and my browser didn't display the whole article. As I pointed out the original legislation gave the treasury secretary (only) the power to dispense the TARP funds, not P-BO. The fact that this only applies to future recipients not past recipients makes it slightly more palatable. The part displayed originally made it sound like P-BO was retroactively changing the terms.
I'm not sure that that changes my point that the entire bailout was foolish.
But since the idiots did it, it makes sense that there be regulation(s) for these funds. My larger point is the fact that P-BO had the opportunity (had he actually attended the senate session) to proactively address this is the legislation.
The arbitrary mature of the amount of "allowable" compensation is concerning, as is the fact that there is a pretty significant loophole that allows some entities to avoid the limit.
So how do you feel about the lavish event that Wells Fargo was going to have in Las Vegas for employees who had done outstanding work for the benefit of the company, an event now canceled?
Feodor,
Officers or not, they are NOT the corporation. It is the corp that is legally asking for the funds, not the officers or any other employee, which an officer is. And your snarky response doesn't answer the question: are these bonuses part of the debt for which the bailout is intended to address. If it is, then the bonuses should be paid, particularly if those intended to receive the bonuses performed their tasks to the satisfaction of the criteria for which the bonus was incentive.
I know if my company took away my bonus then I would leave. Someone less qualified would take my place and the company would be worse off. It’s not like any one executive is responsible for the state of a corporation. I’m pretty sure the world wide financial crisis has something to do with it. These execs will find other jobs and new execs who don’t expect a bonus (because they suck) will take their place. The corporation will be worse off and will continue to suck. This is class warfare rhetoric it is used to stir up the faithful idiots and keep attention off the federal government.
This doesn’t change anything. Bonuses will become “unlawful” all the talent will leave for other companies, the bailed out corporation will go belly up like it was supposed to. The government will have wasted billions trying to run a corporation.
If the government can tell a bailed out corporation what to do with their money then why can’t they tell individuals who file for earned-income credit what to do.
If a family makes less than 40K and files for the earned-income tax credit we should let the IRS run through their spending history and order them to cut the cable, cell phone, internet, cancel the order for Obama commemorative plates and sell the flat panel TV. To ensure they don’t require a bail out again the IRS could require them to attend a college or trade school.
Feodor,
You're an idiot. The officers act on behalf of the corporation. The officers are beholden to the shareholders. The corporation, though a legal entity, of course is not a person and so the officers do the talking, but on behalf of the corporation. One deals with corporations or its officers based on the legal definitions of each. Legally, the corporation is what is asking for the bailout money to cover its debtload, which includes compensation packages for all its employees, which includes officers and/or board members. (Hell, even Chris Dodd refers to officers and execs as employees)
So apparently, according to the serious spiritual mind of Feodor, this Dem government not only thinks it can change things by throwing money at it, it also thinks it can dictate what constitutes debt for a corp unworthy of my tax dollars. People like Obama have no clue on what it takes to run a newspaper stand, much less a corporation, and you think he is justified in making such restrictions. If those execs expecting bonuses are entitled by virtue of the terms of their employment, Barry has no right to say they shouldn't get them. The bonuses and other compensation is part of the corporation's overall debt.
Just because I consider you an insufferable pain in the ass, I want you to know that any further occurance of you taking the Lord's name in vain ("God, you're a child.") will result in your entire comment being deleted. No one will be concerned, since your comments are mostly stupid. And BTW, I am young at heart, and in many ways child-like. But you have so far shown no greater ability than I for reason and common sense. So call me any name you like, Mr. Shitforbrains, and I'll simply consider the source.
"Since a corporation is not a person/s, the corporation cannot ask for anything."
Ummm...
Actually in the 1886 U.S. Supreme Court decision of Santa Clara County vs. Southern Pacific Railroad corporations were granted the same rights as persons under the 14th Amendment.
For Edwin Drood - someone less qualified? Since the current crop of senior management destroyed investment banking as an industry, I find it difficult to imagine someone less qualified than the current crop in charge.
Which is part of my outrage over the entire bonus business. These people need to have money taken away from them. Especially tax money.
Edwin,
Excellent point. What about people receiving section 8 assistance? Should having multiple cars or a 50 plasma screen TV disqualify them? (Before anyone starts, been there done that in my stint as a Section 8 inspector. The majority of recipients who's places I inspected had big flat screens) Should people who get SSI be required to go to rehab, and stay clean?
I honestly don't have a problem with the idea of restrictions, if it is known up front. Then these companies can decide whether to access TARP or not. I do have a problem with the arbitrary $500k number. If P-BO was really serious they would cap the number at $100k. They also would not have left the big loophole.
Feodor,
Apparently you don't work, have never run a business, and/or are 13yrs old. One or all of these is true if you can't understand the basic dynamic I pointed out. Too bad for you and too bad for anyone who must rely upon you for financial support. You're really stupid.
In like manner, you're equally stupid if you don't think using the Lord's name as you did is a problem. I am beginning to understand that like most liberals, you re-write the Bible to your personal tastes. Good luck with that. If standing firmly for sound Biblical teaching makes one akin to a grandmother from East Moline, I accept the compliment.
Obama has no right to limit anyone's income, regardless of the reason. When the state controls the markets it is called Socialism.
There should be no bail-out. Period. You don't give a crackhead money and expect him to pay his bills with it. It's insanity to give money to the irresponsible.
Geoffrey if this all the corporate officers fault then why don’t the share holders vote them out? The answer is because these corporations do a lot of international business. For the last few years there has been a little thing known as the Global Financial Crisis. No one can make money on the international market during a Global Financial Crisis. We in the states have been spared much of it since we had an awesome economy till 2008. But I guess you think the crisis on wall-street and Global Financial Crisis are just coincidental and are totally unrelated.
Since you’re so smart you should ask for a job that doesn’t give a bonus.
Edwin, you are quite right. Everything that has happened - including the recession that started a year ago and the contraction of the housing bubble that started eight months or so before that - is all the fault of liberal democrats. Not bankers who used debt instruments to back more debt instruments. Not investment houses who bought these debts, then called them assets. Not the Bush Administration that curbed enforcement rules. Not a Republican-led Congress that did no oversight for years.
It's all the fault of liberals. And Muslims. It's also part of the gay agenda to destroy Christian America.
I'm done trying to deal with you people. This is the politics of "Duh".
"Obama has no right to limit anyone's income, regardless of the reason. When the state controls the markets it is called Socialism.
There should be no bail-out. Period. You don't give a crackhead money and expect him to pay his bills with it. It's insanity to give money to the irresponsible..."
mark, imho, your opinion is the fairest and most level-headed, because you're not afraid to say a, and then say b...the idea of this whole bailout is anti-"free market" to begin with!
and I don't even believe in what neocons call a "free market economy", but, if we are stuck in an economy that is pretending to be one, then we must say "b", after we've committed to "a"...you can't alter the essential tenets of any economic system's highs or lows by half-measures, unless you DECLARE your intentions to do so...
what we need to ask ourselves, is why the rush? why the manic frenzy to "ram" this utterly flawed bill through? will it not hold up under examination, over the recess? and why?
could it be that the "last" money grab was an utter failure? no one can honestly say that it addressed the problems it was supposed to resolve...why is it we don't even know where it all went, LOL?
forget the partisan bickering...a bill like this will never succeed, the pols will have to do the hard work, and approach this incrementally...otherwise, they are asking "we, the people" to hang ourselves...
why select such a foolish option, and set precedents, where the corporatists will only come back for more, time and time again?
Geoffrey says, "I'm done trying to deal with you people"
Come on now, Geoffrey, please don't make promises you won't keep.
"There should be no bail-out. Period."
Absolutely correct and the first position of the free-marketeers. This discussion assumes the idiot in chief has already committed to supidity, so if he's gonna throw money at the situation....
"and I don't even believe in what neocons call a "free market economy",..."
and this, even though its benefits have been proven successful time and time again. The problem comes when there is interference from politicians.
"what we need to ask ourselves, is why the rush?"
Because the longer it takes, the more easily more people can see it for the payback it is, rather than an actual package of moves that would actually stimulate anything.
"...a bill like this will never succeed,..."
Don't be so sure. Who would've thought a tax cheat could get a gig with the Treasury?
"why select such a foolish option, and set precedents, where the corporatists will only come back for more, time and time again?"
The "corporatists" come to the trough because the money is offered. When this bill fails, the same Dem idiots will say it wasn't enough and do it yet again. But the corps would simply file for bankruptcy if the money wasn't offered, which is what should be happening, instead of lining up for the money. Face it, if the government offered you money, you'd be inclined to at least consider it, particularly if you were in dire need.
Geoffrey,
"Everything that has happened - including the recession that started a year ago and the contraction of the housing bubble that started eight months or so before that - is all the fault of liberal democrats."
Now you're starting to get it. Dem interference in the market place, and that would be interference by people who don't understand the market place, is what led to everything else. There would be no bad loans packaged for sale to anyone if the Dems didn't pressure the lenders to make the bad loans to satisfy their political scheming.
"Not the Bush Administration that curbed enforcement rules."
Don't understand what this statement is supposed to mean. Examples, please. Bush pressed for changes in Fannie and Freddie and was called a fear-monger (what does one call Obungle now that he says not passing the stimulus bill will result in irreversable harm---sounds like fear-mongering to me).
"Not a Republican-led Congress that did no oversight for years."
The only calls for oversight came from the right. See Franks and Dodd for proper placement of blame.
"It's all the fault of liberals."
That's a good boy, but I think you'll still need to write it one thousand times on the blackboard.
this gentleman, peter schiff, sorta kinda sums up my thinking on the matter...
http://finance.yahoo.com/tech-ticker/article/169781/Peter-Schiff-Stimulus-Bill-Will-Lead-to-%22Unmitigated-Disaster%22?tickers=^dji,^gspc,QQQQ,SPY,DIA,TLT,UDN
he's the first "expert" i've heard who even acknowledges how foolish it is to borrow money to spur economic growth, in general
it really takes the partisan yammering out of the issue, to point out, we have an AMERICAN problem, when it comes to borrowing...it limits our ability to grow, industrialize, and protect our national sovereignity
Post a Comment