Somewhere between all the money in the world and none of it is the proper amount of dollars to pay a given manager. Or anyone for that matter. I think the most important question about compensation is not so much how much it is but how pay is determined. And by whom.
Attorney Kenneth Feinberg, former chief of staff for Senator Ted Kennedy and unflappable head of the September 11th Victims’ Compensation Fund is now the Obama administration’s current “pay czar.” A recent WSJ article indicates Mr. Feinberg will be issuing his report on compensation at seven firms that received federal bailout money. Elsewhere in the same article a professor claims compensation, presumably unreasonably high compensation, played a role in causing the financial crisis.
I suspect Mr. Feinberg will find some “unreasonable” or even “outrageous” pay packages in his investigation. Shouldn’t firms that paid such amounts suffer the market verdict rather than endure Mr. Feinberg’s “investigations?” Why inject tax payer money into bailout firms that committed financial mistakes? Who should decide what is too much, or what is not enough when it comes to pay, and on what criteria?
Compensation is one of the most powerful incentives available. It is a vital form of communication between owners and demanders of resources. It signals where human resources are needed. As such, I would think compensation issues are far too important to be decided by a single government official.
In Gilbert and Sullivan’s The Mikado, the Pooh-Bah combines most of the government offices in himself, the Lord High Executioner, the Council of the Exchequer, and he collects all the salaries of each post. How much should Mr. Feinberg be paid? Who should decide, and on what basis? How will we know if he’s doing a good job? Will he work pro bono again as he has in the past? How much is his time worth? Should government appoint another bureaucrat to decide bureaucrats salaries?
What shall we pay our pay pooh-bah? Haaaww, the pay pooh-bah.
