Something must be done. That’s for certain. The government decided it was in the best interest of the American people to extend a lifeline to a number of struggling companies on Wall Street. Wait, what? The government is on Wall Street?!
This sounds utterly absurd. What place does the government have on Wall Street, the backbone of the private sector? Disrupting the natural economic order, that’s what.
The basic principles of a free market are similar to those of the wild: Only the strongest survive. The sick, old and weak companies fall to the wayside and die. Only the strong companies continue to compete and survive. At least, this is how things were.
Like a child observing a forest fire and screaming at the senseless destruction, the government cried foul when companies like AIG and Bear Stearns began to fail due to their own incompetence. What none of us will get to see is what would have happened had these companies been allowed to file bankruptcy.
For some reason, when people hear the term “bankruptcy,” they conjure images of cobwebs and skeletons. They see endless graveyards of dearly departed companies, but this is not so. Like a forest fire, bankruptcy and failure cleanse our economy of weak companies but doesn’t destroy them; at least not the really big ones. Instead, new life grows from the ashes of the old companies and completes the cycle. It is a time for companies to be taken apart, cleared of fat and turned back into lean, mean money-making machines.
Regardless of what I think, the bailouts passed, and now we are burdened with companies that limp along when they should have failed and begun their rebirth.
After seeing billions of dollars pumped into the veins of these sickly firms, Americans want to be assured the cause of the failures will never again rear its ugly head. Here comes the government leading the charge. Like a bedraggled knight swinging his mighty sword at some imaginary dragon, the government targets greed as the sole contributor to the financial crisis and vows to prevent that deadliest of sins from manifesting once more.
To accomplish such a daunting task, Barack Obama has proposed a number of restrictions on the top executives of companies that received government aid.
Now, I’m not saying that these executives did nothing wrong. In fact, I believe they truly are selfish, wealth-obsessed Scrooges who deserved the boot long before they dragged their companies down the gutter. The distinction between greed and wanting to be paid well for your services is not one that I am qualified to make. However, I am afraid that trying to stifle healthy competition by putting a cap on wages and benefits of top executives is not the best course of action.
How different the Gold Rush of ’49 would have been had the government told all those greedy miners that there was a limit on the gold they could harvest. Heck, we might not even be blessed to have the 49ers as a football team. (I was sure they’d take the Super Bowl this year.)
When I hear of capping the pay of executives, I am reminded of Ben & Jerry’s and a similar fiasco they had several years ago. Owners Ben Cohen and Jerry Greenfield decided to help fulfill their social obligations as a company by setting the maximum pay of their CEO to seven times that of the lowest paid employee, the ice cream scooper.
According to BusinessWeek, this policy ended in 1995 when both Cohen and Greenfield stepped down and the board hired a new executive with a salary roughly 15 times that of the lowest earner.
In today’s cutthroat business world, you get what you pay for, and limiting pay and benefits may very well send prominent applicants fleeing for the hills or, at least, to other companies and overseas.
On the other hand, the blown-up salaries of CEOs and the like, especially of those who steer the helm of sinking ships, are outrageous. Visionary and powerful leaders deserve to be compensated, but especially in this instance, poor performers continued to rake in the big bucks.
And this is a problem. Especially in today’s weaker economy, young and energetic business people aching to prove themselves might jump at a $500,000 a year salary. Why not give them a chance? Maybe salaries across the board will taper down to more reasonable levels and the focus will shift from hefty paychecks to the wellbeing of the company. Then, we could see a very positive shift in priorities, and one that might stop similar financial crises from occurring.
Too much government interference, especially in the private sector, is not a good thing, and I am wary of increased regulation. In the end, we can all agree that something must be done now that we all have a stake in the well-being of these companies. After all, it was our money that saved them.
I don’t know if this salary cap and limit on benefits will have the results Obama desires. In fact, none of us know.
We can only hope since it’s happening, regardless of what you or I may want, good will come. By good, I mean the healthy recovery of not only these companies but also our entire economy.
Ryan Rougeau is a junior majoring in computer engineering. He can be contacted at [email protected].