J0236256 In a recent Business Week article republished on msn.com’s MSN Money, a lengthy discussion on the proposed $500,000 executive pay limit for financial executives included quotes from one compensation consultant who said, in effect, these poor folks are being treated unfairly by this “onerous” plan. The worry is that they may go to work for someone else or “stop working so hard” if they have to forego their multi-million dollar paychecks and annual bonuses for awhile. With all due respect to the man’s expertise and his desire to be fair to his clients in the financial services industry, I have to wonder where this guy is coming from.

If the boards of my small business clients were faced with performance like we’ve seen the past year, they would replace their CEOs without hesitation, even if it were a relative.  They wouldn’t need to be reminded by the government that poor performance doesn’t earn bonuses, because the hit would typically be coming out of their pockets. But then they don’t have the luxury of the capital base that supports the financial services industry – a capital base, by the way, provided largely by you and me and our small businesses.

As for those bank execs going to work for healthier rival banks that didn’t have to submit to the government’s TARP controls, I’d have to wonder what a healthy bank’s board would be thinking to bring on someone whose management resulted in multi-billion dollar losses at the bank across town. “Come on in, guy, and do for us what you did for them.” Sounds like a non-starter to me. But then I’m not seeking consulting engagements from the financial industry – good thing, I suppose.

Still another compensation consultant thought the emphasis of the government plan on long term rewards (long-term restricted stock options won’t be limited) is a little too long-term. Given the famously short term thinking of major US companies compared to their peers in companies across the globe, and the quoted statistic that top executive pay in the US comes in at up to 340 times the average worker, I’d have to say a little long-term thinking is way overdue. Maybe even a lot of long-term thinking.

And finally, the expert who says it won’t work anyway, because they’ll find a way around it as they have in the past. Well, that’s a good reason not to try to fix it, don’t you think?

Needless to say, I strongly support performance-based pay – in both directions.

As always, I welcome your comments.

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