McCaskill’s standard

Posted by Marc Hodak on January 31, 2009 under Revealed preference | 2 Comments to Read

Senator McCaskill has proposed a ceiling on the pay of anyone working at a company taking government money–i.e., the same as our highest paid public servant, the President.  The cap of $400,000 per year would include salary, bonus and retirement contributions.  As usual, the Senator failed to think this through.

First of all, the president will get a pension of $200,000 per year when he leaves office.  Even assuming he’s a two-term guy, the value of that retirement, if we calculate that contribution according to proxy disclosure rules, is about $400,000 per year.  So, out of the box, McCaskill is offering an apples-to-oranges standard.  Salary, bonus, plus retirement contribution for the president is about $800,000 per year, and much more if he gets the boot after just four years (so much for pay-for-performance).

On the other hand, this bill doesn’t appear to mention a limit on perks and other benefits, where an executive mimicking the president can easily begin to make up some ground.  To begin with, there is the much-maligned corporate jet.  The president has one. Actually, he has two of them, and each is tricked out with far more comforts and gadgets than the most audacious jet available to the average GM or Citibank CEO.  In addition, the CEO should be entitled to a fleet of helicopters, as well.

Then there’s a housing allowance.  To get something equivalent to Obama’s crib, a mammoth, historic mansion with sprawling acreage in the heart of a major city, would test the generosity of even the most spineless board of toadies.  But let’s throw in, say, the top floor of the newly renovated Fairmont Plaza.  Plus unlimited use of their entire staff, dining, and ballroom spaces.  If you’re an auto company CEO, I don’t think the entire city of Detroit would offer an equivalent value, not that they would take it.

And if you think the post-retirement benefits of office were extravigant for Jack Welch, they don’t compare to this guy’s.