3/24/2010

Obama administration claims that executive compensation doesn't matter

Is it surprising that the Obama administration seems to have released this information to the NY Times?

For months, Wall Street banks and the troubled automakers feverishly protested that their top executives would flee if they were not lavishly rewarded for their talents. New data, however, suggests the departures were more of a trickle than a flood.

Of the 104 senior executives whose pay was set by the federal pay regulator in the last two years, 88 executives, or nearly 85 percent, are still with the companies even though their pay was drastically cut back, according to people briefed on the government data.

The relative stability, at least within the executive suite, suggests that a soft job market, corporate loyalty and personal pride helped deter the feared management exodus at the companies hardest hit by the pay rules. . . .

Most of Mr. Feinberg’s pay rulings, for example, were in effect only for the final few weeks of 2009 — and affected only a handful of the most troubled companies. . .


Obviously the NY Times claims that this shows that pay doesn't matter. But a 15 percent change in just a few months seems significant to me. More changes are likely to occur over time.

There are other issues.

1) It is possible that the executives are promised compensation in other ways or delayed in time.
2) There might be big differences between people who are moving between jobs and those who are leaving a job.
3) How hard people will work.
4) Will people retire early?

Washington just assumes that shareholders are stupid with their own money.

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