The Cons, and Pros, of Executive Pay Curbs

There are a number of articles covering the new pay curbs for bail-out executives in today’s Journal. The most interesting, for my (unregulated) money, is nestled deep in the “Money & Investing” section.

There, writer/Viking Thorold Barker identifies three potential problems with the new limits on executive pay for companies receiving “exceptional” aid.

Here’s what Thor views as problematic; the new curb could:

Distort labor markets: exceptional talent at these “exceptional” institutions may bail to U.S. subsidiaries of foreign banks or to banks that have not TARP-dipped (or, hey, maybe even Ford – which has keeps announcing that is NOT taking bailout funding).

Devalue the C-suite: Since the plan does only addresses pay for executives at the very top of the organizations, these individuals could seek out lower-ranking positions, with plusher pay packages, in their companies.

Let some companies slide: The rules are not retroactive, Barker, points out. “So AIG, theoretically can bumble along, while a company getting into such trouble now would be subject to tougher rules.”

Barker also identifies what he views as the plan’s upside, including the way it encourages banks to repay government aid ASAP.