Friday, September 25, 2009

Limiting Pay

by Dick Mac

I am against limiting the pay of bankers, or anybody else.

Everyone should have the opportunity to earn as much as possible.

That said, what the banking industry fails to do is to be honest. Citibank will pay a staff lawyer $75,000, then give her a $250,000 bonus at the end of the year so she earns what she deserves. What Citibank should do is pay her $250,000 and give her a thirty percent bonus at the end of the year.

The pay structure in banks is a scam, and I don't even understand what is being scammed, but I do know that the notion that you pay me a nickle then give me a million dollar bonus is immoral at worst and disingenuous at best.

I do not doubt that there are bankers worth a million bucks a year. I'm sure it's true. So, pay them a million bucks a year. Don't pretend that they earn a hundred grand and then give them a nine hundred thousand dollar bonus, just pay them the million bucks. This is not rocket science!

Banks have failed to grasp the idea that their pay structure is offensive to most Americans, who earn about $45,000 and get a couple of grand (if anything) as a bonus.

Dear Bankers: we are not stupid. We may not understand WHY you pay your staff like this, but we know it isn't kosher. So, why don't you just bend to public pressure and pay your staff their salaries and limit bonuses to, say, 30%. We regular people can relate to that, even support it, even if the base salary is ten million and the bonus is two and a half million.

It's insulting to us that you use this phony pay structure, and it makes us mistrust you more than you would expect. So you should stop it. Just make the change. You all know math, you can figure it out.

If you won't stop it, the government will do it for you, and that will be bad.

Wise up! Take responsibility for this mess and put your houses in order.

Jeez, are bankers really this stupid?

1 comment:

AKA Ted Faigle said...

Not sure how I feel about the idea of limiting salaries for bankers or anyone else. Doesn't mean much to me except to the extent that those biggest earners may be exempt from paying a fair share of taxes on that income, relative to what I pay.

Like playing the lottery, chances of ever winning big or achieving such a lofty prize as extreme wealth through work will never be an issue for the overwhelming majority of us. So what do we care if upper limits are placed on executive salaries? I'm just sayin'...

I don't believe that salary limits are the same as limits on income or personal net worth. I do believe that governments should not be permitted to limit individuals' ability to accumulate as much wealth as they may through combinations of salary, investments and other sources.

But when so much of an individual's income derives from salary & compensation at one job, earned through work effort and positioning, it raises all sorts of questions about equity of pay and relative value of effort within an economic entity where other outlays are limited in various ways.

As I understand it, market investments are valued largely according to stock performance standards, while compensation levels are subject to no (supposedly) objective measures. I guess that's why equal pay laws are sometimes desired - so that some workers' efforts that may be equal to others' don't consign them to different classes on the basis of attributes over which they have no control. Like sex, gender, race, etc.

Wage controls or not, it all seems like social engineering - is that always a bad thing? Is it better to rig the system or let it default to whatever irrational bias rules the day (e.g. worth of male effort vs female effort, white vs black, etc.). Is it best to just let everyone believe that there are no limits to their earning potential as a motivating device?