Neat little story here about Chrysler turning down some $750M in government money, reportedly because it would have subjected their executives to as yet undetermined compensation limits. They instead went elsewhere to the private markets to obtain their funding.
Putting aside for a second the wisdom of Chrysler's decision, this story brings front and center the issue of institutions that the Obama Administration believed MUST be saved through billions of taxpayer money, now beginning to walk away from or give back government funding because of the onerous strings attached to it...some of which amount to ex post facto restrictions.
The logic of the big money aid was that it was necessary to get the big lending institutions lending again....more liquidity in the credit markets was seen as a way of jump-starting the financial system, something most observers thought was as a necessary step to broad economic recovery. Without the money (the thinking went), the recovery would be hampered.
But by attaching executive compensation strings, the federal government has created a situation in which the targeted recipients are realizing that the cozy relationship with the feds comes at too high a price. Firings of CEO's, dilution of common stock value, limits on executive compensation...these are all some of the costs of letting Uncle Sam into your boardroom. So some of these guys are saying they'd rather come out of this recession more slowly, but intact, than more quickly as some kind of public receivership.
So the money that was voted to help move the the recession more quickly into the past is actually acting to keep it around longer. Follow the law...of unintended consequences....
Sounds like several of the CEOs you are describing are more interested in their compensation than the health of their company. If they can get their companies profitable without gov't intervention great, if not, then they need to play by Uncle Sam’s rules. I assume you are not suggesting “no strings” or government oversight with taxpayer bailout monies? Please enlighten/remind me, was this your position with the rank and files’ union negotiated compensation packages? Excessive executive pay and general employee pay should be equally examined to determine what the market and stockholder can hold. Unfortunately corporate boards determine compensation packages for CEOs and rank and file; worse these board members tend to be handpicked by CEOs. I like Lee Iacocca’s model when he headed Chrysler – $1 salary until profits and then scaled to the amount of company profits. He made out quite well and rightfully so…. JPH
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