Wednesday, February 04, 2009

How much do you deserve? Who gets to decide?

Here is a problem. And it’s a big one. Who deserves the right to decide how much money you should get paid?

What if I told you that the Government has decided that as an employee (not of the Government, but of private business) you deserve no more than $25,000. It doesn’t matter that you went to college, got a degree, and owe tens of thousands of dollars. It doesn’t matter that prior to Government intervention you were making $125,000. Because the Government thinks that $25,000 is enough to live on. Would you be happy?

What if you own a business? Maybe a grocery store, or a restaurant. Or perhaps a dentist office, or a car garage. And the Government said that even though you work 60 or more hours a week, every week, usually without vacation, you only deserve to be paid $75,000 or less? It doesn’t matter that the business makes enough to pay you $200,000. It doesn’t matter how hard you work, or what the business is worth. Because they think that is more than enough. Because executive pay should be capped.

Do you see the problem?

I think most people can accept that the Government has no right to say how much money they make if they don’t work for the Government. That’s why we have private business. That’s why our economy is the greatest in the world – even in a downturn.

But the upcoming rules to be stated by President Obama say exactly that. Keep an ear open though, as the exact wording will be far more pleasant to hear. It will be packaged under the guise of reigning in the “runaway excesses of the financial industry and Wall street greed.” And it will be phrased as a means of ensuring executives are responsible with the bailout money President Obama plans to give them.

Now I have long said that an executive, a CEO, does not deserve a huge pay package (in excess of millions) for work where a company is in trouble or worse off than when they started. That’s not their job. And if a CEO is fired for poor performance, thus endangering the health of the company, they definitely don’t deserve a golden parachute. Conversely though, if they improve the company, thus ensuring growth and job stability, they certainly do deserve a huge payout bonus. But that is for the shareholders of the company to determine, not the Government and not arbitrarily.

It can be said, and with good reason, that any company that has accepted Government money has the Government as a shareholder (at least). And I can accept that. Except the proposed limits are not just for companies that receive Government funds.

“The administration will also propose long-term compensation restrictions even for companies that don't receive government assistance.
According to the official, the proposals include:

• Requiring top executives at financial institutions to hold stock for several years before they can cash out.
• Requiring nonbinding "say on pay" resolutions — that is, giving shareholders more say on executive compensation.
• A Treasury-sponsored conference on a long-term overhaul of executive compensation.”


I have a problem with the Government telling me how much money I deserve to make for the work I do. And if you think the Government will not do this, recall that there is no Department, Agency, or Division of the Government I can name in the last 40 years that has gotten smaller or given up power they held. Can you?

Once Government has established the ability to determine the wages of any private group of citizens, it can do it for all citizens. And it will always be stated as something for the good of the nation. Until it’s not.

There is a name for this kind of system, its called communism. And the nations that have tried to live with that system have all had it fail. Unless you have lived where people line up for their ration of meat – the best of which has been siphoned off for black market sales – you may not see the problem with all of this. But I have, and I was beyond greatful that I was an American and could afford the black market goods.

“long-term overhaul of executive compensation” – listen to that. What exactly does it mean? Who does it apply to? Who will determine what is executive compensation?

That is not a free market. That is not a capitalist strategy. That is not why I own my company and work hard long hours. I don’t bust my arse in my own company because I hope one day to have the Government act as my employer and tell me how much I can make with absolute authority.

This is a problem. And I don’t care how it’s sugar-coated, it’s a bitter pill to try to make me swallow. And how long will it be before the Government decides to tell us where to spend our money? Or what to do with our own time? It’s a slippery slope and we are riding down the path like a bat out of hell.

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