On restructuring executive pay.
The recent proposal by the Fed to regulate bankers’ compensation practices is understandable given the events of the past two years, but setting caps on salaries and bonuses misses the fundamental problem of compensation on Wall Street. Despite the public resentment surrounding finance-industry payouts, the fact is that no one objects to paying for performance. We just want to make sure we’re not getting fleeced or paying for pure dumb luck, and this is where the problem lies.
Right. What occurred on Wall St seemed more like this:
Far too often, sophisticated risk/reward computations have been used to justify enormous payouts to those who happened to be in charge when good outcomes occurred, only to leave shareholders holding the bag when the bad outcomes came along — a case of “Heads I win, tails you lose”.
Ummmhmmmm.
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