Saturday, November 7, 2009

On Executive Pay

We know it's to blame, we just can't seem to prove it...

Thing is, we're really good at the HOW... executives in good old boy networks compensated the crap out of each other irrespective of the performance of their various corporations.  The result was an economic crisis which penalized the common man through tax dollars going to bailouts and unemployment and pension fund losses and such.

It's the WHY that we don't know.   If executives knew this was coming, why did they lose so many billions of their own money?  Didn't they realize what the common man doesn't, namely that the tax dollars funding bailouts come, by and large, from the executive class, not the common class?

All told, it doesn't seem like the crisis was a good thing for executives.  What does that mean?  Did they know it was coming and mis-judge the implications?  Did they not care?  Or, and this seems too intuitive to be true, but hear me out, did they not know it was coming?

If they didn't know it was coming, then how would changing incentives help?

I'm of course the first one to argue in favor of institutions and incentives guiding behavior, but what behavior and what incentives here?  Sure we'll come up with some sort of regulations now in order to fight the last war, but we're still going to be critically under-regulated in whatever leads to the NEXT one, right?  Anybody see a way out of this?

1 comment:

Devin said...

Socialism is the way out.