Federal Reserve To Outline Best Practices For Compensation
First the White House announces its plans to slash executive compensation and now the Fed is hopping on the bailout bad behavior bandwagon.
WASHINGTON (Reuters) – The Federal Reserve on Thursday issued guidelines aimed at ensuring pay and reward structures for bank executives do not lead to the sort of excessive risk-taking that contributed to the financial crisis.
The guidelines apply to any employee able to take risks that could significantly and adversely affect the safety of a firm, the Fed said in a statement. The Fed will conduct a review of the practices of the 28 largest and most complex banking organizations.
As I suggested in my previous post, there will still be a ridiculous amount of money to be made. It just won’t be borderline criminal and obscenely dangerous any more. And people of all political stripes should be applauding that given the very real threat of global financial collapse we were presented with a year ago.
Here’s the question: As I asked before, would you like these same rules applied to all publicly traded companies?
(Photo: Getty via Daylife)
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Mr. Gardner,
You wrote; “As I suggested in my previous post, there will still be a ridiculous amount of money to be made. It just won’t be borderline criminal and obscenely dangerous any more.” I am not sure you are correct. Where are these safe profits to be found? We are in the worst economic downturn in 80 years. The United States, unlike in 1929, has little in the way of an industrial base. Our economy is dominated by FIRE (Finance, Insurance, & Real Estate). None of these are in good shape. What then is a safe investment that is going to yield billions of dollars in profits?
I support capitalism. End all subsidies to entities that can not support themselves. This inlcudes American car companies, NFL/MLB/NBA tax payer supported stadiums, tax payer supported symphony orchestras, museums, artists, theaters, newspapers, radio staions…
So my answer is: the market will determine the proper compensation if your enterprise is profitable. And there is no such thing as ‘too much’ profit.
The flipside to your question : Should a profitable corporations compensatin be reduced because it is too profitable? and that is:
Should a massively unprofitable enterprise recieve any compensation?
If you are a liberal the answer is a resounding yes!!!!.
Because the standard practice of a for-profit enterprise is to link your salary in relation to how much value you bring to the enterprise.
And yes in some cases that value may be seen as ‘obscene’ to a liberal.
Is a symphony conductor’s salary ever ‘obscene’?
Liberal: “Spurious argument. Symphony conductors don’t make millions”
But in relation to the non-existent profits that a symphony orchestra makes; taking any salary is ‘obscene’.
Because that salary was taken from people who have no interest in that orchestra. Just like millions of tax-payer dollars going to build NFL stadiums that the majority of the taxpayers will never enter—yet pay for.