Banks and other corporations that are "too big to fail" are now being told that their top executives have been too big for their britches.
That's especially true now that their britches have been bought and paid for by taxpayers -- today's taxpayers and the future generations who will be paying off the federal debt that is growing even faster than usual as we try to spend our way out of a recession caused, mostly, by the bad management of the same big companies we are now rescuing.
President Obama announced Wednesday that he will limit to $500,000 a year the pay of the top executives of companies that will, in the future, receive special assistance from the federal bailout machine. It is a mostly symbolic gesture that, however much money it saves, sends just the right signal: High rollers reduced to staying afloat on the federal dole cannot expect to continue their own lavish lifestyles without a break.
Some kind of statement was necessary -- to get the attention of the companies that are getting the money and to restore at least some of the confidence of the public that is giving it. Most of the assistance has gone to huge banks, and too many of them have taken the cash in, lent precious little of it out, and continued to handsomely reward the very executives who steered their ships into the rocks in the first place.
The move will help make sure that any company that might have sought a taxpayer bailout on a whim will think better of it. And, by encouraging corporate boards to offer extra executive rewards in the form of a special category of stock -- stock that can be cashed in only after the feds cash out -- the rule encourages CEOs to get their houses in order quickly, pay back taxpayer investments with interest and become private concerns once again.
It's a shame the president had to do this. The CEOs should have done it themselves -- or, absent that kind of moral judgment, boards of directors should have done it for them.
That $500,000 ceiling still sounds like a lot of money to most people. It's even 100 Gs more than the president himself makes. And its target group is limited. The limits will not -- and, by law, probably could not -- apply to firms that have already been issued federal bailouts or emergency loans.
The limit also covers only salary, not such things as pensions or the use of corporate aircraft and company-owned luxury housing, although individual deals worked out with companies seeking large chunks of federal aid may well put a cap on such free spending. And the boards that sat silent on the pay issue might want to wake up to that, too.
It is notable that even Republican congressional leaders, traditionally the voice of corporate excess in the service of trickle-down economics, favor the Obama salary cap and the motivation behind it.
Of course, if corporate boards and stockholders had been doing their jobs over the years, rewarding executives who built profitable corporations on strong foundations instead of attracting love 'em and leave 'em high flyers, we probably wouldn't be having this discussion at all.
That, with any luck at all, will be the take-away from Obama's policy.