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Washington weighs in on executive compensation

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in Human Resources

Overheard on Oct. 22, the day the Obama administration set strict limits on executive compensation at seven financial services firms and car manufacturers that have yet to repay federal Troubled Asset Relief Program (TARP) bailout funds:

Reward hard work, but …

"I’ve always believed that our system of free enterprise works best when it rewards hard work. But it does offend our values when executives of big financial firms—firms that are struggling—pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat.” — President Obama

Beyond TARP recipients?

“There is entirely too much reliance on cash, and there’s got to be a better way to tie corporate performance to long-term growth. I’m hoping that the methodology we developed to determine compensation for these individuals might be voluntarily adopted elsewhere.” — Kenneth Feinberg, U.S. Treasury “pay czar”

Balancing the highs and lows of performance bonuses

"[There is] an irreducible asymmetry in any performance-based compensation scheme that makes it difficult to perfectly balance risks and rewards. When markets are hot and things are going well, the sky’s the limit in terms of how big a bonus you can earn. But when profits suddenly turn to dramatic losses, the lowest a bonus can reach is zero.” — Steven Pearlstein, Washington Post business columnist

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