This attitude encapsulates the worst of the worst of this crisis. But hold on a minute, please. Perhaps some people would disagree pointing out that there shouldn't be limits for rewarding the talent. But, who on earth would think the values of stocks would be skyrocketing forever? (Economists in the late 80's, the 90's and early 00's, the ones that sold the notion that it would be better to attach exec salaries and bonuses to stock perfomances - and specially
Enron execs, those didn't believe in
free markets or capitalism but economical and social darwinism-).
Balance sheets don't grow forever, either. But they rise slower and steadier than stocks. They do not tend to fall unexpectedly, after some political event or low market expectations. Hey, assets do not tend to dissappear right after the market crashes! A few exceptions: when the assets are stocks and bonds precisely, cooked accounting books (outright deceit)
or stupid notions like mark-to-market accounting. The latter concept alone throws the
accounting principle of conservadurism (not to mention the common sense): in everyday words, it is prudent to register a potential loss, but not to register a potential (and not earned) profit.
That said, what Dr. sipmac means is, this time
somewhat agrees with
Obama. Exec salaries and bonuses are tied up to
completely irrational expectations. But ironically,
Keynes never have been so utterly wrong. Long term thinking matters. Only short term thinking could sustain for so much time (ironically, again) those irrational expectations. But cutting salaries to the bone in the name of "
social justice"? Plain demagoguery. You can't attract the best minds for jobs like these just for peanuts and beer money.
Company growth is a rational way to fix executive level salaries. The more you think about it, the more natural it looks. Balance sheets are the best way to measure the company growth.
It's incredible no one talks about this in the current crisis. Again, remunerations must be, more than fixed or regulated, corrected. I like that term better. The beneficiaries of this insane system will never agree to regulate themselves (It's so much money...). The market should have ended this anomaly, and in a way, it did:
it crashed. But nobody realizes it this way. So, it looks fair that this time the goverment should meddle into this particular affair. But again, Obama's "social justice" attitude encapsulates the worst of the worst of this crisis. It's about human nature: absolutely nobody wants draconian pay cuts. Not even
Hollywood stars.
