This was bound to happen. And it just shows the absurdity of the U.S. government micromanaging private companies.
To be clear: The bonuses Wall Street gave itself with taxpayer money were outrageous. But the answer is not to put a choke-chain around firms’ necks and force them to behave in ways Congress finds appropriate. It is to seize, restructure, and sell off insolvent firms and leave the rest alone.
Kate Kelly and David Enrich, Wall Street Journal: As banks and securities firms wrestle with growing regulation of compensation practices, substantially increasing the base salaries of top employees could become a popular response, some industry officials say. A larger salary would reduce the relative importance of bonuses but also help financial companies increase those payments, since they usually are calculated as a percentage of total annual compensation.
“The trend is to increase the base pay in light of the reduced bonuses,” said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable. “Without the revenue” that top performers provide, he adds, “these companies can’t survive.”
Under the forthcoming rules, bonuses could come to no more than one-third of the total annual compensation paid to employees covered by the restrictions. Some compensation experts view the bonus limits as a mistake that turns the notion of pay for performance on its head, despite Wall Street’s culpability for the recession and credit crisis.
“These are not bureaucratic positions where you’re paying individuals high salaries,” said Michael Karp, chief executive of Options Group. “How can you pay a banker a really high salary without knowing what kind of revenue that person generates?”