The Free Press, Mankato, MN

Editorials

October 25, 2009

Our View: If failed CEOs leave over pay cuts, good

Wanted: Chief executive officer for company that took undue risks and had to be bailed out by the government; salary commensurate with experience but only 50 percent of the last guy’s multi-million dollar salary.

The above facetious want ad turns the argument of losing good CEOs on its head a bit. Last week the Obama administration’s “pay czar” Kenneth Feinberg decided to cut the pay of those who head companies getting taxpayer bailouts.

Feinberg decided these CEOs would take a 50 percent cut in total compensation. In one example, that would have meant an executive with Citi Corp. would have been paid $50 million instead of the $100 million he made last year.

Still, some argue that these kinds of cuts will drive top talent away from these companies that so desperately need these titans steering the ship. But the average American can rightly question CEO talent if their company needed a government bailout and their so-called “ship” was the Titanic. That is why CEO pay cuts sell so well on Main Street, and leaves taxpayers with the small satisfaction that at least the government had done something to these people who not only need bailouts but caused the collapse of one’s 401(k).

We hope the political gain isn’t the only thing that comes out of the actions of Feinberg, the so-called government “paymaster.”

Rewarding CEOs or any American worker for good work, helping increase company profits and shareholder value is the American way and should remain so. But somewhere along the way these public corporations’ boards of directors were not looking out for stockholders. CEO pay and incentives were expanded in a way that was not only fuzzy, but created short-term thinking and risky behavior.

So it would be wise for Congress, the Treasury Department and the Federal Reserve to examine the connections between chief executives, their boards of directors and their stockholders. It’s not hard to see the rewards were out of whack for what these CEOs were doing.

Those who suggest it will be hard to get other qualified CEOs to take the place of those facing pay cuts forget there may be a ample market of unemployed CEOs or those a step away. We return to our imaginary want ad: We have a feeling that in this economy, there will be qualified people willing to take the job.

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