Barney Frank: TARP's comp curbs could be extended to all businesses

[WriteDown]

Source: Financial Week

Congress will consider legislation to extend some of the curbs on executive pay that now apply only to those banks receiving federal assistance, House Financial Services Committee Chairman Barney Frank said.

“There’s deeply rooted anger on the part of the average American,” the Massachusetts Democrat said at a Washington news conference today.

He said the compensation restrictions would apply to all financial institutions and might be extended to include all U.S. companies.

The provision will be part of a broader package that would likely give the Federal Reserve the authority to monitor systemic risk in the economy and to shut down financial institutions that face too much exposure, Mr. Frank said...

Read more: http://www.financialweek.com/apps/pbcs.dll/article?AID=/20090203/REG/902039977/1003/TOC&template

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This is nuts!!! I can understand it if you want to use the TARP funds. After all, he who pays the piper, picks the song. But if this new idea would be put into place, you'd have to extend this to sports players, actors, etc.

[FrenchieCat]

1. I think Barney Frank must have been misunderstood......

sometime it is difficult to understand him....I have found.

That's not something one should be saying at this time. period.

[Lasher]

2. It's not that crazy of an idea for publicly traded companies.

BOD oversight and shareholder authority have become a joke.

[Kittycat]

3. I have no problem with shareholders having a say in pay, but disagree

that this rule should be unilateral. I do believe that it should apply to any company seeking a bailout though.

[JDPriestly]

4. The plan I heard Frank espouse was to require shareholder approval

on salaries of a certain size. Not a bad idea although I suspect the salaries will generally be approved automatically -- except when a company is performing very badly.

[Lasher]

5. See, even that's a problem.

Individual shareholders don't really have any meaningful input. The system has been gamed.

[Bonhomme Richard]

6. FDR did it during WWII and, because of that freeze, companies...........

began offering employees benefits like health insurance and paid vacations. That was the only way they could hold or attract good employees.

[WriteDown]

8. It did?

May want to do a little research. Health insurance in the US did not evolve until later on in the 20th century. During FDR's time, most were expected to pay their medical expenses in full. Of course medical expenses were much lower then.

[Bonhomme Richard]

11. Did a little research. It's true

"Employee benefit plans proliferated in the 1940’s and 1950’s. Strong unions bargained for better benefit packages, including tax-free, employer-sponsored health insurance. Wartime (1939-1945) wage freezes imposed by the government actually accelerated the spread of group health care. Unable by law to attract workers by paying more, employers instead improved their benefit packages, adding health care."

The link
http://www.neurosurgical.com/medical_history_and_ethics/history/history_of_health_insurance.htm

[WriteDown]

15. Read that again...

Nothing to do with FDR. Everything to do with unions and you can throw in GM in there since they led the way on many things. Also, you'll notice the cause of the wage freeze: WWII. Maybe we should also institute rationing. Who's up for liberty cabbage?

[Lasher]

13. This occurred after WWII

In lieu of higher salaries companies promised good retirements and medical benefits, most of which would be funded at a later date. That worked for awhile until the advent of the imperial senior executives, who reneged on these promises and plundered pension funds while slashing medical benefits over time. The result is before us today, the 'ownership' society where each of us is on our own. Whenever executives slashed benefits they declared phantom profits because known future liabilities were reduced. Little accounting trick there, and it comes in pretty handy if you don't have a clue how to turn an actual profit at the company you managed to get control of.

If you think I'm making this up, look at the historical distribution of wealth over the past 30 years. This is a distinct legacy of Reaganomics. The American dream is in shambles and we have hardly raised an objection to its demise.

[w4rma]

7. Awesome. (nt)

[stillcool]

9. If the board of directors...

of a corporation decides to rape the corporation by excessive payouts to its executives, millions of stockholders lose money when the corporation goes bust, but it is not illegal. I'm sure there are plenty of people that think it is just fine that investors get cleaned out, but perhaps they are attempting to curb the practice in order to instill confidence in the market? An actress is paid by the producer. If the movie goes bust, the producers lose money...not millions of people.

[WriteDown]

16. So there are no investors on a movie?

News to me. Also, I guess companies will just stay private then and wealth will really be in control of just a few people. Let's not forget that there are no requirements that a company go public.

[stillcool]

21. Of course there are..

That's why there is such a long list of producer, associate producer etc., but it's not the stock market. Would you invest your retirement fund in a movie? I suppose people still have enough confidence in the market ..so who cares? I don't. I hope all the corporations turn out to be Enron's

[Lorien]

10. Excellent. With unemployment rates being what they are, there is no reason

to pay any exec over half a million per year. And if there's a cap nationwide, where do they think they'll go? $500k is hardly "roughing it". Doesn't Japan have a 400k ceiling on executive pay?

[WriteDown]

14. For what purpose?

Living in NYC, an exec making 500K is doing average at best. Japan doesn't have a cap, and their CEO's salaries are notoriously difficult to calculate due to their being no SEC equivalent in Japan. They due tend to receive a lot more material gifts such as the company giving them a million dollar golf membership or a really nice house. Just because a CEO is receiving 500K instead of 5M does not mean that the additional funds will go to the employees. Its just as likely that an profit will go toward upgrading a factory, modernizing a workspace, etc.

[Lasher]

24. How about a basic sense of fairness?

Some people think it's a quaint old sentiment but I'm one of those old fashioned folks who cling to such values.

[WriteDown]

27. Fairness?

Then I'd start with the ball players and movie actors. They are making millions on basically being genetically lucky.

[Lasher]

28. That's a lot more fair than the CEO who got control of somebody else's company by sinister means.

And then siphons off the profits at the expense of shareholders and employees, cheered on by the BOD that he selected. Remember the part where a rising tide was supposed to lift all boats? Well that didn't take into account that everyone doesn't have a boat. And even at that, by design the tide of Reaganomics has only lifted the yachts.

Wake up, we don't all have a fair chance.

[WriteDown]

29. Please name a couple of CEO's....

who got control of someone elses company through "sinister means." :eyes:.

[Lorien]

25. For this purpose:

http://www.youtube.com/watch?gl=IN&hl=en-GB&v=fF6lxILnRuE&eurl=http://www.japanprobe.com/%3fpaged=4

Yes, if they take a pay cut they WILL have more money for their employees. But since you pretty much always take the GOP position here I don't expect you to accept that.

[WriteDown]

26. Moronic....

Lets say you run an assembly line with 10 workers. You are currently paying each worker 10$ and the CEO 1000$. You enjoy having your employees, but you know that to compete in the future, you really need an assembly line consisting of robots costing 90$ a piece. The govt comes in and states that you must cut your CEO's salary by 90%. This is a great situation, because the CEO cannot make more money elsewhere and is unlikely to leave. You take the 900$ you now have left over, fire all your employees, and buy assembly robots. Boy, that was stimulative.

[LynzM]

12. What I'd like to see...

Is a fixed maximum ratio of highest-paid to lowest-paid within a company. I know there are tons of loopholes, but it galls me to see people making millions while others struggle to eat and house themselves :(

[jaybeat]

23. You could do that...

You could also have a "must not exceed" percentage of company net profits, with some sort of base so a money-losing company could still pay people.

Bottom line is, until the era of the Robber Barons, Corporations existed at the pleasure of, and to meet specific needs of We The People. That's why they have "charters" which are "granted" by the State in which they are incorporated. The notion of "corporate personhood," of course, totally does vaporizes the original notion of a corporation existing for a limited time, to serve a limited (and public) purpose.

Bringing corporations back to where they are obliged to act in the public interest is what we will ultimately have to do to re-establish democracy and the rule of law.

"Brace yourself. Here it comes."

[mamameow]

17. israel

let's do it like israel, this democracy that we love so dearly. i propose that all companies say like wall street, banks, insurance companies etc can profit only so far then they cannot go any further until their competitors catch up. so like a friend of mine from jerusalem who owned the most successful advertising agency in israel, had to suspend making more profits until the other companies caught up to him. then the government lifted the cap to another level and he could now make more profits until hie outpaced his competitors. then the process started over again. now that is democracy!!!!!! he finally came to the u.s. where he could make all the money he wanted with whatever legal means he could and the competitors be damned.

[nbcouch]

18. A better solution

might well be to restore some progressivity to the income tax. An across-the-board cap on salaries is never going to pass, but a 60-70 percent top marginal rate just might, and it would help raise some much-needed revenue too.

[Optical.Catalyst]

30. Yep! Base the income tax rate of a company's CEO on the salary of the least paid employee

Make a calculation of all full-time permanent employees (excluding temporary, seasonal, and trainees) and find the ratio of the lowest paid workers to the highest paid workers. The highest top income tax rate on the CEO (for all his income, not just salary from the company) is based on this ratio.

The result would be if a CEO wants to have a huge income, he has to pay the lowest wage earners in the company more.

[NashVegas]

19. I'm Down With It, But Damn, Good Luck

[Veilex]

20. I don't agree with a flat pay cap for publicly traded companies...

However a flex cap would work outstandingly.
The Flex Cap concept is quite simply this: No employee/owner/exec etc. may receive more than 50 times (or insert your preferred number) income than the lowest paid employee.

If something like this were enacted, I can guarantee that suddenly employees would be making a living wage! (CEOs,CFOs,CIOs LOVE their pay)

[mdmc]

22. 1. God Bless B.Frank 2. B.Frank please tell us WHY tarp was so

important?

Why did we need to bailout the banks without any questions or accountability?