Editorial

Cap on pay a bad idea that doesn't have much effect

Steering through an economic crisis is like rowing a leaky boat through a fog bank. If you don't do anything, the boat will sink. But which way should you row?

Both the final months of the Bush administration and first weeks of the Obama administration have placed a premium on bailouts and government spending to revive the economy. Among the multibillion-dollar bailout packages have been huge infusions of government cash into ailing financial institutions and automakers. The effect has been hard to measure, in large part because the government -- despite its assurances of transparency -- doesn't exactly know what the recipients of the funds have done with the money.

For average taxpayers, the corker has been huge bonuses paid to so-called financial wizards whose actions contributed heavily to the financial meltdown. In response, President Obama has ordered a cap on executives' compensation.

While the compensation cap is a highly popular thing to do, letting government decide who gets paid what in the private sector is inherently wrong. Moreover, the presumed effect of compensation cap has been overblown considerably. To think that limiting an executive's salary to $500,000 a year will do much to bolster a the staggering economy is wishful thinking.

The day after the president announced the compensation cap, The Wall Street Journal published an article outlining all the ways corporations could skirt the new rules. And the limitations on which executives would be affected all but make the cap useless.

Is it a good idea to reward executives who perform poorly? No. But it's not up to the government to make that call. Corporate boards and stockholders bear that responsibility.

Too much of private enterprise is sinking into the maw of government as it is. Putting government bureaucracy in charge of the compensation committee only makes things worse.

Comments