Corporate Pay

So the Obama administration and the congressional democrats are looking to put a wage cap on companies that receive bailout money. I think this is a good thing…for starters. Of course the government is in a special place here where they actually have some clout and some reason for putting such restrictions in place. I am, of course, totally against government intervention into truly private business and trying to dictate wages of any sort; I guess I even have trouble with the minimum wage…even though those in government who advocate for more equal distribution of wealth should realize that increases in the minimum wage actually decreases employment. Milton Freedman (who won a nobel prize in economics) called the minimum wage law the most “anti-negro” law in US history. Its passage caused the lay-offs of close to a half-million African American workers who were then replaced by more highly trained whites. I’m not sure I agree with his assessment but I do think it’s a step in the wrong direction. But that’s not really the point here…I’m more concerned with the other end of the scale. I suppose what I desire is a new accountability of CEOs to their stockholders. Clearly this is going to be an issue put forward by groups of concerned investors who are going to want to see a positive ROI for themselves. If I were a major investor in a corporation (I’m not a MAJOR investor in any large corporations), I would want a system wherein my CEO was paid a percentage of gross profits. No limits on the amount of money they could make. Well what if the company posts a loss? Well that might not always be the fault of the CEO, so in these cases their performance should be judged on their performance as it relates to average gains and losses across their business sector. If they outperform their competitors…put their pay at the 75th percentile for the company payroll. If they underperform put them at the 25th percentile for payroll. I think that a CEO of a major corporation who was promised 0.01% of gross profits would be much more inclined to make smart informed decisions on the part of his employer rather than decisions in his own best interest (because now they would be the same…not always so when a CEO sits on the boards of 30 other firms). Along those same lines, I think we should look into the salaries of our law-makers. The  house of representatives should be working for the will of the people while the senate should be for restraint and forward thinking. With that in mind, house salaries should be determined relative to the cost of living. Senate salaries should be determined by the ratio of government surplus to average tax burden. Thus a system where high government surplus (only until the national debt is paid off) with high tax burden yields a low ratio with low pay. A high government surplus with low tax burden yields an increase in pay and a low government surplus and high tax burden means they get booted out of office. If only the people could vote on congressional pay rates and not the recipients of that pay. Patrick OUT!!!


What I’m Listening Too: Johnny Cash


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