Compensation Caps

Hank Paulson has been adamant that there can be no cap on the executive compensation for any company participating in the bailout. His reasoning? Because they might not participate. Now on the face of it, this seems absolutely laughable. You don't want to take the handout from the man on the street, because he insists you agree to kick your habit? Okay, that's less money we need to handout to the Wall Street beggars.

But that's actually not the reason. The reason is that he wants to hold auctions for the toxic securities, and the more companies that participate, the better chance of setting a fair market value on them. His worry is that companies who are not in dire straights, but do have these securities will opt to take their chances. That diminishes the number of companies participating and leaves this toxic waste out there.

How about this idea: Regulations that limit the compensation of any employee of a publicly traded corporation to a multiple of the lowest compensated employee of that corporation? Compensation would include salary (in any form), stock (in any form), or any other remuneration which the corporation reports. IE., if the multiple is set at, say, 100, then if the salary of the lowest paid employee is $35,000 then the CEO could receive $3,500,000. If the CEO wants options on 100,000 shares of stock, then the janitor needs to receive 1,000.

That removes the disincentive to participate in Paulson's We-Pay-Cash-For-Your-Unwanteds" nonsense.

The best approach is probably to put the regulations in place as fast as possible (this is an emergency, remember?). Then slow walk the Bailout until after the election or when Paulson's head explodes, whichever comes first.