{"id":1940,"date":"2009-10-21T14:23:00","date_gmt":"2009-10-21T22:23:00","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=1940"},"modified":"2009-10-21T19:46:33","modified_gmt":"2009-10-22T03:46:33","slug":"political-punishment-disguised-as-prudent-pay-policy","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/political-punishment-disguised-as-prudent-pay-policy\/","title":{"rendered":"Justifying a 50% pay cut, poorly"},"content":{"rendered":"

Obama’s pay czar<\/a> has just dropped more shoes<\/a>, this time on 175 pairs of feet:<\/p>\n

Kenneth Feinberg, the Treasury Department’s special master for compensation, will lower total compensation for 175 employees by an average of 50%, these people said. As expected, the biggest cut will be to salaries, which will drop 90% on average.<\/em><\/p><\/blockquote>\n

I’m sure that Mr. Feinberg, like any good fiduciary, carefully examined the value of each of these 175 executives, individually determined their cost relative to their value, evaluated competing alternatives for their talents, including more entrepreneurial venues (e.g., hedge funds) where they can make gobs of money away from public scrutiny, then evaluated the risk associated with losing each of these people, and the cost to the shareholders of doing so.<\/p>\n

Or, more likely, Mr. Feinberg was told by the politicians who ran a different calculation that he had to cut those executives’ pay in half, regardless of the financial consequences, and he figured out how to deliver that result.<\/p>\n

The political calculation went something like this:\u00a0 “If we slash the pay of these executives enough to grab headlines, and lose 35% of them, e.g., to competitors, early retirement, etc., then taxpayers-as-shareholders may lose about 25% on their investment relative to keeping that talent.\u00a0 But, of course, the taxpayers-as-shareholders will never know what they’ve lost because if they thought like prudent investors we government officials could never get away with the crap we pull on them all the time<\/a>.\u00a0 On the other hand, headlines that say we really stuck it to the bankers can get us a 4-6 percent voting edge in competitive districts where we might otherwise be vulnerable to political challengers.<\/p>\n

In short, the politicians have figured out yet another way to buy our votes with our dollars.\u00a0 And our largely innumerate media pretends like these decisions are made purely based on the public good.<\/p>\n","protected":false},"excerpt":{"rendered":"

Obama’s pay czar has just dropped more shoes, this time on 175 pairs of feet: Kenneth Feinberg, the Treasury Department’s special master for compensation, will lower total compensation for 175 employees by an average of 50%, these people said. As expected, the biggest cut will be to salaries, which will drop 90% on average. I’m […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,10,21],"tags":[],"class_list":["post-1940","post","type-post","status-publish","format-standard","hentry","category-executive-compensation","category-invisible-trade-offs","category-politics"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1940","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=1940"}],"version-history":[{"count":5,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1940\/revisions"}],"predecessor-version":[{"id":1945,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/1940\/revisions\/1945"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=1940"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=1940"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=1940"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}