Executive Pay Limits

So P.B.O. won't let companies who accept government bail-out money pay executives more than 500K (http://www.cnn.com/2009/POLITICS/02/04/obama.executive.pay/index.html). I'm not really sure how I feel about this. on the most basic level, Great! we won't be giving government money to people that screwed up these companies and cost tax payers a lot of money. I feel like any self-respecting CEO probably has enough in savings that he can take a $1 a year salary or at least make what he pays his average employee. The second thought is from the conspiracy theorist in me who is scared that this might discourage these companies from taking Federal Funds. I don't think this will happen for a couple of reasons: If the shareholders and board of governors of a company thought that this was happening, the CEO would likely be on the curb right away; anyone who is a CEO also has a lot invested in his companies stocks that he'd probably be taking a huge financial hit on that route if he did not do what was best for his employees. My third thought, which does seem extremely dangerous, is this: Are we discouraging competent people from going to work for these banks or other companies?

Consider Entrepreneur A, the founder of company X to take over. In 15 years, Company X has grown into a major corporation worth 650 Million dollars, employs 10,000 people, and has continued to turn a profit in these tough times (If those numbers that I just pulled out of the air are completely unreasonable, S my D. The point is that the company is successful). Entrepreneur A is making 4.7 million dollars, a salary that the board of directors has rewarded him with for continuing to deliver a profit and make a lot of money for a lot of people. Citigroup sees the good work that Mr. A has done with his start up, thinks that he would be a good person to be their COO, and offers him the job with a salary of... 500 K and stock options that will vest in 10 or 15 years. Is there a good chance that he would perform excellently? Yeah! Is he going to take a $4.2 Million pay cut? Probably not.

That example was pure speculation based on nothing besides the fact that there are people who do do good work and are compensated extremely well for it. I totally understand Obama not wanting incompetent executives getting rich. That's obvious, and a lender should have some say in the business practices of it's borrowers. However, I think he needed to be more thoughtful about the implications that this has on prospective employees that might fix these companies