Confirmed: Executive Pay Caps Are A Joke


We’re wondering: How many people — including several in the media — went to bed last night thinking that Obama had just issued some broad diktat capping Wall Street pay at $500,000? They sure talked about it that way, as if that were the new pay ceiling until further notice. And to be fair we thought that might be the case, up until the actual announcement was made.

But as John Carney pointed out, this was actually an extremely narrow announcement, covering only a few people at a handful of firms, and even they can probably get paid well under the right scendario.

Anyway, that’s the reaction from analysts as well, according to Bloomberg, all of whom realise that this is a bunch of light and noise with no meaning. At firms like Goldman and JPM (which have both received substantial government assistance, just not exceptional government assistance), the new rules will have no effect whatsoever.

So they’re a joke, but ultimately we’re happy about that, since executive pay debates are all about perception, not about economics. This is exactly how it should be, really. Obama gets up, makes a populist statement to make people happy, but in reality doesn’t do anything to screw up the banking system worse.

See Also:
The Five Things You Should Know About Obama’s Pay Caps