Thursday, February 05, 2009

Today's Hypothetical Situation

Okay, try this:

The company you work for just accepted a bail-out. However, President Obama has attached some strings to the deal. The CEO's pay has been frozen (or cut) to $500,000. "Yeah!" you think. "They were stupid, the top guy oughta pay!" But Obama isn't finished. Next, he says that none of his immediate subordinates can make more than $300,000. "Well, fine!" you say. "They were just as culpable." Ah, but that's still not all! Middle managers will no longer be allowed to make anything more than $150,000. After all, fair is fair. Suddenly you start squirming, because you've been looking for a job at that level, and you really had your eye on a house in a great neighborhood with nice schools.

But then comes the coup de grace: Obama says no one else in the company will be allowed to make more than $40,000 a year. You make $41,000, and your budget is tighter than Ebeneezer Scrooge's so you can save for that dream house. Well, now you no longer need to worry about that dream house. Not only can you not afford to save for it, you're going to have to cut back on everything else you buy: groceries, bills, activities, vacations--because you just got a pay cut!

Now you're angry. How dare he tell me, a "little guy," how much I can make? I'm not responsible! I just work here! And what I make is my business anyway! What if I want to earn more? Now you know how the boss feels. Do you REALLY think it's a great idea for companies to accept bailout money if it comes with strings attached? And do you REALLY believe it's so noble to cut particular people's pay in the name of "fairness?" Careful what you wish for.


Unknown said...

So we should be OK with companies taking bailout money and using it to provide golden parachutes for the CEOs that drove the companies into the ground?

I mean, if they're uncomfortable with it, they're free to deny the bailout money and go bankrupt all on their lonesome. But they don't get to cry foul when the only reason *any* of them still have a job is they took taxpayer cash.

Bart said...
This comment has been removed by the author.
Bart said...

If the company pays back the money, on time, with interest, I really don't care how they do it as long as they stay solvent and improve themselves legally. If they don't, then they've got some 'splainin' to do.

If a company borrowed from a bank instead of the government, they'd face a different set of restrictions and requirements. A private creditor will do an investigation of a company (or individual entrepreneur) before agreeing to a line of credit. The company/owner must provide some hint of where the money is going and a plan for when and how they will pay it back. That's it.

If a company takes government money, the government will tell them how to run the company and what they can or can't spend the money on, even if what the government says is absolutely stupid and runs the company further into the ground. In short, they lose control of their destiny.

For instance, the government can and will put a cap on executive pay. As a result, the CEOs you revile so much will bolt. The company won't get a first-stringer to replace that CEO in the front office; instead they'll get the guy or gal who will take the $500,000 and will "play ball" with whatever the government says.