Curbing corporate greed

I'm a CEO and you're not, so how the hell do you think you can tell me what to do?

Economics reporter David Leonhardt (the lion-hearted?) goes into the den of AIG and tells corporate shills where to get off.  These bonuses, he writes -- this things they like to call "retention pay" -- are "rationales for showering money on chief executives and bankers regardless of how well they are doing their jobs." 

Throughout this crisis, policy makers, starting with President George Bush and Ben Bernanke and now including President Obama, have been a bit too deferential to Wall Street. That deference has fed populist anger, which threatens the political viability of the necessary continuing bailout of the credit markets.

This has been a very troubling time for supporters of Barack Obama.  For those who wanted him to break not just with George W. Bush but with the corrupt and growing hegemony of corporations in America, early spring of 2009 has been a cold slap in the face.  

The bonus scandal offers Mr. Obama and Mr. Bernanke a chance to get ahead of the curve — so long as they come up with changes that extend well beyond A.I.G.

The starting point would be a rigorous analysis of whether the government can take specific steps to restrain pay. Some thoughtful management experts think any such efforts are doomed to fail. Others are more optimistic. “There are ways to do it,” says Lucian Bebchuk, a Harvard Law professor.

Across-the-board caps on pay don’t make sense. But perhaps the government can prevent companies from claiming a corporate tax deduction on any pay above a certain threshold. The current limit, which is $1 million, applies only to base salaries and thus has little meaning. Or perhaps companies can be penalized if they pay bonuses based on short-term profits, as A.I.G., Lehman Brothers and just about every other company recently has. The Fed made a suggestion along these lines recently, but it didn’t do anything more than ask nicely.

The administration needs to separate itself from the Federal Reserve and -- eventually -- rethink the management of the Fed.  But it also needs a tax code that is clear and makes sense.  Quit using the code to obscure injustice.

Today’s tax code makes no distinction between income above $373,000 and income above, say, $5 million. Both are taxed at 35 percent.

That is a legacy of the tax changes of the early 1990s, when far less of the nation’s income went to millionaires. Today, you can make a good argument for a new, higher tax bracket on the very largest incomes. In the past, the economist Thomas Piketty says, higher marginal tax rates tended to hold down salaries and bonuses, because executives had less incentive to angle for multimillion-dollar pay.

Can you hear the right screaming "class warfare"?  Be prepared to yell back at them, "people over corporations!"  Ask them why corporations have been so afraid to play on an even field.

Do these ideas stem in part from anger and bitterness? Of course they do. How can you not be a little angry and bitter about the role that huge, unjustified pay played in causing the worst recession in a generation?

In fact, that’s sort of the point. Given the damage that’s been caused by our decidedly unmeritocratic system of paying executives, the most irrational course of all would be the status quo.