Sunday, October 25, 2009

Will Bank Executive Compensation Limits Weaken Banks?

President Obama has limited the salary and bonuses of employees of banks that received and have not repaid TARP funds. The banks affected complain that their valuable employees will leave for jobs at banks that aren't affected. The affected banks warn that their performance will suffer.

I would prefer that the compensation be determined by the shareholders of all publicly traded companies instead of the boards of directors but that is not how it is done. I think the shareholders would if the could reduce compensation more than President Obama. So, I agree with President Obama's limit on compensation.

Why would the banks that did not need TARP funds or have already repaid the funds want to hire the executives of banks that have yet to fully recover? If you were the CEO of a successful bank would you replace your employees with those from unsuccessful banks? I wouldn't.

Here's another way to look at this matter. If we gave every American who is unemployed by Wall Street's collapse of the economy an equal share of all Wall Street bonuses this year each share would worth more than $30,000. Who deserves that money more?

2 comments:

Kansas Bob said...

I was glad to see Obama step in on this. Those board members are all part of America's Strongest Union and act like they are not accountable to anyone.

Joe said...

I think investment analysts and managers are the only people that that matter to the boards; how they appear to Wall Street.