Today we look at the executive pay capping taking place in the United States. President Barack Obama recently initiated the process that high level executives cannot be properly compensated for their work. No one is going to shed tears over bankers having to take a pay cut, but the overarching issue here is DEADLY.
How can companies be expected to retain talent when those with talent know they cannot participate fully in the gains they create for the firm? This is terrible for firms everywhere. The consequences are dire. Oddly enough, they best example to illustrate this is not in the United states, but right here at home in Canada. Specifically, the fiasco of the compensation of the Canadian Imperial Bank of Commerce CEO Mr. Gerry McCaughey.
We have a quick recap of why the financial mess began with an explanation of Asset Backed Commercial Paper, the fundamental interconnectedness of banks through their assets, (YOUR mortgage DEBT), and finally to the extension of this economic turmoil by not adhering to the basic principle of Western Capitalism: Bad companies making bad business decisions SHOULD BE ALLOWED TO FAIL!
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