GRAVES: Taxpayer mney dictates reductions

About 175 executives at seven U.S. corporations will receive reduced compensation, according to the Wall Street Journal. Immediately, this sparked complaints that the government is dictating executive pay. There is truth in that statement but when the American public’s money bailed out those companies earlier this year, U.S. taxpayers became their Board of Directors.

Some of those seven companies — General Motors, Chrysler, AIG, Bank of America, GMAC and Chrysler Financial — have recorded substantial profits. Some have even repaid a portion of the money extended by the government. Some haven’t repaid any. In fact some might need more money.

Wall Street executives of other companies fear an intrusion and outright interference by the government, namely the Obama administration. The president appointed U.S. Treasury Department’s Kenneth Feinberg as pay czar,. The precedent of the government setting wages fuels anxiety.

The headlines are a bit misleading though. While the top execs won’t receive large cash payments as they have in the past they won’t be hurting. They will get deferred stock options as payments.

In theory, stock payments may be converted to cash in the future. Hopefully, by tying compensation to stock options, corporate leaders will make decisions based on long-term growth versus decisions made to increase short-term, end-of-year bonuses.

Many compensation experts say that by cutting cash payments and unnecessary perks, such as country club memberships and private planes, that these CEOs will go elsewhere. I have a different take.

Number one, if the corporate heads were so good at their jobs, why were their companies close to collapsing financially? Second, with their decision-making track records, who else take a chance on them? And third, with the pool of successful company CEOs to replace them, I’ve a feeling those threatening to leave will think hard before actually doing so.

Employment opportunities are abundant when times are good but right now times aren’t good. It’s especially challenging for lower level management types and hourly workers. As unemployment rates remain high, company boards and stockholders don’t need extremely high-paid and high-profile executives.

Even now many Main Street Americans are wondering how the former corporate heads of failing companies were able to turn things around so quickly. Have these leaders suddenly made sound financial decisions or did the government infusion of cash make the financial books look good?

Think about it. If the seven corporations formerly on the verge of collapse suddenly improved, it had to be due to the government’s backing. Many people down the income ladder who still have jobs are wondering for how long. In addition, as gas prices rise 10 to 20 cents a gallon a week, who can afford to buy anything, goods or services?

If some or all of the 175 top executives facing pay cuts want to leave, let them. Let them see how it feels to have their lifestyles suddenly change.