Wednesday, January 6, 2010

Presidential Property


The President met with financial leaders around the country some weeks back in a meeting, according to the White House, to discuss ways to help get the country back on track. It was apparently also to make sure that these executives understood that he was unhappy with the salaries and bonuses being handed out in 2009, for as Obama said on “60 Minutes” just before, "I did not run for office to be helping out a bunch of, you know, fat-cat bankers on Wall Street.”

Of course many of these banks took government bailout money, so I suppose they should expect some scolding from this newest investor. As stewards of the people's money, the government says that some of that investment is being wasted on executive salaries (and believe me, the federal government is an expert on waste). For them, this apparently becomes a question of ownership.

The banks, strangely enough, believe that their stockholders own these respective companies; and with their boards are allowed to determine the rate of pay for their employees. They do this in the form of employment contracts at all levels from the janitor to the CEO, which are legally binding agreements for salary, bonus, and benefits. Now a contract in any form is ultimately a legal agreement to determine the disposition of property, which is why it is so important. 

The Rights of Property are a fundamental principle upon which this country was founded. They were so important to the Founding Fathers that the phrase "Life, Liberty, and the Pursuit of Happiness" in the Declaration of Independence originally read “Property” instead; with Jefferson only grudgingly changing it to insure that slavery was not justified by the document. They understood that the Right to Property was a ultimately Right to Liberty. If an individual cannot own his labors, the reimbursement that he receives for them, and the disposition of such as he sees fit; he owns nothing and cannot be free. 

While I can understand the concern of the President and Pay Czar with regards to what may be excessive executive compensation, I find no power provided them to interfere with this process that trumps those specified rights. Do I object to the salaries and bonus that these people are making ... Yes! I object to them however, no more than I object to the high salary of a baseball player who hits .250 after signing the big money contract, than I do the coach who signs a similar agreement and produces repeated losing seasons, than I do to the actor who commands big bucks for a performance in an inferior movie. I object to anyone who gets paid more than their job performance has earned them, as far too many of us get far less than ours merit. I likewise object to anyone who gets paid a bonus for a failing to perform in a way that enhances the success and profit of their employer.

But my opinion should prove of little consequence when it comes to the rate of compensation for anyone. Neither should this be of any concern to the government. Whether an employee is making too much money is a matter of contract, with the labor of the employee and the level of compensation guaranteed under this legal agreement by both custom and law. The employer has a right (and perhaps even an obligation) to re-negotiate such compensation if it is not justified by the performance of the employee. 

They can also likewise terminate said employee if their performance is found to be unsatisfactory. Under no law existing in this country however, is it the right or obligation of any branch of the government or any member thereof (elected or appointed) to ignore these basic rights of property. 

There is no provision in the Constitution to allow the government to step in and cast aside the concept of a legally binding contract simply because it believes that it knows best what people should be paid. The President apparently believes that government investment trumps all others and makes them the true owners to these companies however. They evidently believe that any use of taxpayer funds creates some form of “higher ownership” of these organizations that must be exercised as compensation control. If this is allowed to continue and the government can dictate compensation for employees after the fact in this country, two things will eventually happen:
  1. The rule of law and the concepts of contracts, property, and liberty will suffer a serious setback in this country (if they haven't already).
  2. The companies forced to follow the dictates of the President and the Pay Czar will find themselves part of what will become the only property that will still matter in this country, Presidential Property.

7 comments:

Maggie Thurber said...

nice post....

Daniel Jack Williamson said...

If those institutions hadn't been bailed out, then they would have gone under, and those company executives would be looking for work. Their new jobs probably would have brought their compensations in line with what they were worth. The bailouts sustained them in their positions, thus keeping their compensation bubbles from bursting.

I object more to their overpayment than I do the baseball player or movie actor that underperforms. That's because baseball and film aren't being bailed out, because they remained sustainable industries. The bailed out companies, though, took high risks that were subsequently mismanaged, thus they deserved to fail and should have been permitted to fail. Wall Street should have been in ashes by now. Those CEO's should have been pounding the pavements by now looking for new work with resumes in hand (resumes documenting their culpability for the collapse, I might add) and there would be no discussion whatsoever about caps on executive compensation.

Tim Higgins said...

DJW,

You are absolutely right that these businesses would have failed without the bailouts and these executives would have been looking for work. (I suspect managing a business into bankruptcy wouldn't help a resume.) I therefore object to the bailouts as much as I do to the salaries and bonuses. None of that however, allows the government to violate the rule of law regarding legal contracts (which these executives had).

Likewise, the government (much like it did in the auto industry) has determined that ownership of stock or guaranteed indebtedness appears to be less important than their "opinions" of how things should be done. This is a violation of the right of property in this country which, in my opinion, could be considered equally egregious.

Daniel Jack Williamson said...

Sorry, I think I made my points about as clear as mud. Let me try one more time.

This time, let me acknowledge that I agree with you about upholding contracts.

OK, point one: While you are equally disapproving of the overpaid baseball player and the overpaid Wall Street executive, I regard the Wall Street executive with far more umbrage than the baseball player because the baseball player isn't responsible for collapsing his industry.

Point two: An additional point in rebuking the Obama administration (in addition to upholding contracts) is that it's the administration's fault, by way of the bailout, that these execs still have jobs. No jobs = no controversy over executive compensation = no need for a pay czar. Therefore, the administration's outcry should cease, since they are to blame for prolonging the existence of these companies that ought to have failed.

Tim Higgins said...

DJW,

Je suis d'accord

Daniel Jack Williamson said...

bien

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