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Salary Regulations Coming

by: Robert McIntosh   posted: 2009-03-31 12:30:00
Viewed 441 times. 1 Comments.

With the fiasco that the Democrats created over the AIG bonuses, this no real surprise. Barney Frank even hinted at it previously, but now has introduced legislation to limit salaries of any US company that the government has a stake in.

[I]n a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the “Pay for Performance Act of 2009,” would impose government controls on the pay of all employees — not just top executives — of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to “prohibit unreasonable and excessive compensation and compensation not based on performance standards,” according to the bill’s language. That includes regular pay, bonuses — everything — paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.

In addition, the bill gives Geithner the authority to decide what pay is “unreasonable” or “excessive.”

And it directs the Treasury Department to come up with a method to evaluate “the performance of the individual executive or employee to whom the payment relates.”

The bill passed the Financial Services Committee last week, 38 to 22, on a nearly party-line vote. (All Democrats voted for it, and all Republicans, with the exception of Reps. Ed Royce of California and Walter Jones of North Carolina, voted against it.)

So the Treasury Secretary has the power to say "You make too much money" to employee, not just top executives.

Leaving aside the whole government power grab story here, there is another problem. I've worked for a couple different government agencies and they are notorious for not paying well. So what? Well, this means that people who have the potential to make really good money will leave any company that has these restrictions or even the potential for these restrictions. So what you say? That means talent will leave these companies and that is the Achilles heel of most government agencies, the best talent leaves because the pay is better.

On the flip side, this could be a wake up call for companies that are looking for help. They may very well not seek government "assistance" as they know a lot of their top people will jump ship. In turn that means less that the government can get their hands on private companies and impose their will.

By the way, why can't the American public do the same to congressional salaries? They work for us right?

h/t Michelle Malkin

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Comments 1

bill on 2009-03-31 14:28:53

Lots of early retirees.

When all you have is people, this makes no sense, except to an interchangeable part of the human race, like Bawney's Fwank.


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