Monday, September 21, 2009

The Wages of Government

"A group of blue-chip companies is lining up behind efforts to voluntarily change their pay practices, in part to head off potentially more onerous restrictions out of Washington. . . . .

Many of the Conference Board's principles resemble those of the Obama administration, including tying a 'significant portion' of incentive compensation to a company's long-term success, rather than rewarding short-term gains that some worry promote risky behavior. The proposal also calls for doing away with certain pay practices, such as 'overly generous golden-parachute payments' in the event of a takeover, and long-term employment contracts that require generous severance payments."
I suppose rhetoric is a beautiful thing, at least to some. I would like an explanation as to why it makes sense to say a group of companies will voluntarily change their pay policies when at the same time these companies are trying to placate government.

It seems to me more accurate to say that "a group of companies are being coerced by government to change their pay policies." And, if government passes legislation or writes regulations about pay policies, then it would seem accurate to say that government has forced companies to change their pay policies. Or, if we would prefer to match rhetoric with more rhetoric, how about we say instead that "a group of companies have decided to give into to the big government bully." I think my use of coercion and force is more accurate, but telling the story in terms of the "big government bully" might help tell a story with more political traction.

Check out the paragraph that lists some of the proposed changes. I've read this entire news article, and I don't think I can find any analysis that explains why it is thought that these companies have bad pay policies now. So, I have no way to judge whether these changes make any sense. What's more, it seems to me that any company's pay policies should seek to achieve the company's purposes, and not the purposes of government.

Oh, and I wonder how "generous" is defined?

Finally, since we are considering the responses of business to the coercion of government, is it completely silly to ask where Congress or President Obama constitutionally have the power to coerce, or to force, businesses to change their pay policies? I can't see that they do in the Constitution I have.

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