by Eric Wolf

Created on: October 08, 2008

The fact that it is necessary to debate whether to continue paying exorbitant salaries to executives who have taken their companies, their industries and even their country to the brink of financial ruin is proof in itself that we may need to legislate against this greed. Understanding how an executive could play a part in creating a financial disaster of this magnitude and then be willing to accept any salary at all is beyond most citizens' moral comprehension. Allowing funds appropriated from taxpayers to help fund their paychecks is a slap in the face to any honest working person.

From the perspective of the average American the fairness of the bailout is suspect in the first place. Allowing executives to profit from it only makes it more so. Take for example the man or woman who has borrowed their way into a hole they cannot dig out of and must declare bankruptcy. They will likely lose assets that they have struggled to gain and will have to endure the stigma of a marred credit record for the next ten years. That credit record may prevent them from gaining a new job at some point. It certainly will result in higher payments on car and home loans - if they can get them at all. Bankruptcy is a kind of bailout, but it carries little in the way of financial reward.

Another, perhaps more appropriate example would be the gambling addict. There has never been a losing gambler who has ruined the financial health of his family who has been given a fat paycheck for his efforts. There is help for gamblers and our society provides various safety nets, but the gambler still knows he lost.

Big banks and Wall Street executives have borrowed money using borrowed money as collateral and have then gambled it away, betting on the value of more borrowed money. Their winning streak has come to an end and the fallacy of the game has become apparent. Allowing the financial executives to continue to reap profits from the game whether they win or lose is to allow them to perpetuate the game itself. Any executive who has participated in the decision making process that led to this financial situation should be dismissed. Their attorneys will state that their contracts give them the right to their salary or severance pay. Invalidating all contracts should have been part of the bailout plan. The government's money should come with the government's terms.

Another argument against limiting executive pay is that it may become difficult to find qualified executives to lead these organizations. The simple rebuttal to this is that apparently the executives that were being paid were not all that well qualified to begin with. I'm sure there are numerous economics teachers out there who would willingly take as little as a tenth of the $700k salary of a financial executive to steer a company clear of risky investments.

In short, the average taxpayer in the United States cannot be expected to reward top executives knowing full well that their gambling addiction is what necessitated the bailout in the first place.

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