COUNTERVIEW | This is a bad idea

The news that US President Barack Obama plans to limit executive compensation in banks that receive federal bailout funds has been met with vociferous agreement from the beleaguered American public, which is outraged that taxpayer money was used by Wall Street high-fliers to buy corporate jets and award themselves huge bonuses. But amidst the not-unnatural Schadenfreude that regular Americans are feeling, there are some arguing correctly that this may be a case of cutting off the nose to spite the face.
The $5,00,000 executive pay cap proposed by Obama limits the ability of the organisations that need the money to actually climb out of the mess.Which executive will take the jobs of those supposed geniuses who got their banks into the mess to begin with, when the money is less than what any good professional can get in more stable companies? Attracting new talent, which is necessary if these companies are to get out of the rut, will be very difficult when salaries are low and the only additional compensations can be made in the form of restricted stock grants that cannot be sold off until government loans have been paid back.
The pay cap idea is flawed at many levels. The real problem with executive wages was that the same people who got the companies into trouble made millions. But why should new people with strong track records, who bear no responsibility for the mess at these companies, be penalised? Sooner or later, companies will find creative ways of getting around the wage caps. They will have to do so if they want to attract new talent. Rather than helping creative accounting, wouldn't it be better if executives just got their dues up front? In a face-off between government bureaucrats trying to rein in compensation and Wall Street lawyers dedicated to maintaining salaries at high levels, it is unlikely that the former will win. Even a popular political decision such as this may have unintended consequences and delay the recovery of the US economy, while encouraging bad behaviour from banks desperate to circumvent strict compensation norms.TIMES VIEW | Time for just desserts