The Smart Asset

Band-Aid Solution: Pay Czar's Slash Will Inflict Minor Wounds

By Harkavy in Bonuses, Featured, Pirates, Wealth

Thursday, Oct. 22 2009 @ 9:32AM

Despite caterwauling from some Wall Streeters, pay czar Kenneth Feinberg's looming decision to cut salaries is more of a Band-Aid on an ouchy than the infliction of a gaping wound.

It will affect 175 execs at seven firms. Whoop-de-do. Execs and their representatives were in on negotiations, and the result may assuage public outrage. But Feinberg's action will be no more effective in the long run as a cure for excessive greed than a kiss on your bruised knee from Mommy. Sure, it feels good that someone cares, but it doesn't really help.

Best take so far is from the WSJ:

[S]ome executives will still walk away with large paychecks. And some big salary cuts might skew overall numbers. Outgoing Bank of America Chief Executive Ken Lewis will receive no salary for 2009. Already, Citigroup Inc. is telling employees the net impact of Mr. Feinberg's rulings will be minimal because the cut salary will be shifted from cash to longer-term stock grants, said people familiar with the matter.

Also see the NYT's "Who Gets Paid What."

If you really want to get into the issue, see the Economist's debate on executive pay between Nell Minow and Steven N. Kaplan. Minow's take: "Excessive executive compensation of the past decade is both a symptom and a cause of the current economic mess."

The cleverly done online debate was on this statement: "...on the whole, senior executives are worth what they are paid."

The vote so far is a resounding 80 percent no. The Corporate Library's Minow is an effective debater, being a reasonable, sober advocate of cleaning up America's board rooms. (See my "Wall Street Fell Through Rotten Boards -- a Reminder From Nell Minow," March 20.)