Executive Compensation

Well with all the yelling and screaming in both Washington and New York, it appears that the "emergency" requiring "immediate" action will have to take at least a little more time. The measure did not pass. Although I say "good" it is tempered by the knowledge that something will get done. I hope the markets and the financial industry figures it out on their own without the "help" from the government. One of the provisions that needs to be in whatever they finally do relates to Executive Compensation.

Having been around, mostly, small and family owned businesses all my business life, what some of these people get paid and the Golden Parachutes" they negotiate is pure greed. I am a free market person, but this is crazy. What can you do with $30 million that you cannot do with $15 million, or $5 million, etc.Can you imagine a company that is doing say $20 million in annual sales paying its CEO $1,000,000. Probably not. At this level the President would have to live on say, $300,000 per year or $25,000 per month. I could make it on that. Let's say the company is doing $50 million in annual sales and the CEO is getting $1 million or a little over $80,000 per month. Can you live on that?

The bill Congress proposed would have limited executive compensation to $500,000 if they were a bailout company. I think that is to low and maybe the limit should be maybe $4 million per year (or so says my barber). I agree. Again the Congress went overboard. How are we to believe them. They react so irrationally. Perhaps because of the Treasury Secretary and the head of the Federal Reserve did so too? Could you imagine Alan Greenspan reacting like this?

If you own or are involved in a Small business (annual sales of less than $25 million) or a family owned business of any size, use reason not greed to determine executive pay. Sure there can be perks, and should be, but if you keep it within reason nobody will fault you for being excessive and then at the end of the year if you have a pile of money left after all accruals and saving for a rainy day, do what Lincoln Electric (largest maker of arc welding equipment in the world) divide it up among all your employees. You want loyalty and quality, try doing that and see what happens.

What do you think?