Should Government Cap Salaries On Wall Street?

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We are a capitalistic society without a shadow of a doubt, and the reason why many people migrate to America is because here they have the potential to achieve anything without limits. What makes our nation great is the freedom that allows corporations to thrive and innovate and bring in and retain top talent from around the world.

This also leads to corporate abuse and other issues as well though, I can see why everyone things CEO and Board Member salaries should be slashed and capped, especially if a resulting company is failing or going downhill. But this would be like taking back the $20 million dollars a film studio paid for an actor because the movie flopped at the box office.

Salaries and bonuses are rendered based on “perceived” worth of someone’s job and performance on the job, what I do think is that bonuses, shares, and salaries should not be set by individuals but should be voted on by board members. I don’t think it should be capped or set by the government, but I think top shareholders should have a right to dictate salaries and compensation for all high end company positions, after all their investment in the company entitles them to help direct which direction the company goes.

I don’t mean to compare publicly traded companies to the entertainment industry, but it is very much comparable on this front. Sports figures get paid millions of dollars, should they perform poorly then their contracts get cut or they earn less in future contracts. Movie stars command premiums the same way, it is based on supply and demand when you think about it. Demand is the consumer which is the viewers, and the people are the supply.

Companies are no different and they meet the supply and demand of consumers as well as their own internal organization, companies will fall under if the continue to pay top execs more than they are “worth”.

The one exception to this rule is this:

Government Bailouts if taken by a company then gives the right for the Government to dictate how the money is used and what the company can do. If a company is desperate or foolish enough to accept government funds, then they don’t have the luxury of setting their own wages, bonuses for top execs. Our public tax dollars fund these companies and therefore everyone must take cuts until the government funds are repaid.

Minus that above rule, the government should not be involved in setting caps on salaries or wages for any company. I do think however that top exec pay should be voted upon by senior shareholders, not just board members, so that a greater number of stakeholders in the company have influence into what compensation the top execs make.

-Justin Germino

Updated: May 13, 2009 — 1:54 pm