You can’t live on $500k in this town? Bull.

I just read this article in the NY Times, on the effect that a plan by Obama to cap top executive pay at $500k for banks accepting bailout money will have on these executive’s lifestyles.

And I just had to write a post, because nothing pisses me off more than some of this crap. The author nears the article’s conclusion with this:

The total costs here, which do not include a lot of things, like kennels for the dog when the family is away, summer camp, spas and other grooming for the human members of the family, donations to charity, and frozen hot chocolates at Serendipity, are $790,750, which would require about a $1.6-million salary to compensate for taxes. Give or take a few score thousand of dollars.

I read a NY Times magazine article during the election season on Obamanomics, and found that I really felt good about his economic policies, ideals, and views.  His positions are probably the closer to my own than those of any other politician, and certainly any president or even major presidential candidate, ever.  One of the things in the article that stood out to me was the tenet that society functions the best, driving production and increasing economic success, when the top executives of a company make about 25x more than the bottom employees.  So if the lowest employees at the bank make $40,000 a year, then the top employees should make about $1 million.  In that case, the $1.6 million/year that the article is claiming is needed to lead the common lifestyle of a bank executive is roughly 50% more expensive than it should be for all of the employees and the company to perform their best.

The article goes on to explain the need to fit in with other bank executives:

Does this money buy a chief executive stockholders might prize, a well-to-do man with a certain sureness of stride, something that might be lost if the executive were crowding onto the PATH train every morning at Journal Square, his newspaper splayed against the back of a stranger’s head?

The man would certainly not feel like himself on that train, said Candace Bushnell, the author of “Sex and the City” and other books chronicling New York social mores.

“People inherently understand that if they are going to get ahead in whatever corporate culture they are involved in, they need to take on the appurtenances of what defines that culture,” she said. “So if you are in a culture where spending a lot of money is a sign of success, it’s like the same thing that goes back to high school peer pressure. It’s about fitting in.”

My response? Ok, but the point is, your bank failed and is looking for a government bailout.  You need to suck it up.  Top executives are supposed to earn the pay that they receive, and banks that need bailouts, regardless of how common that may be, failed in their jobs.  So what’s the harm in instating laws to encourage them to work towards success in order to earn the money they make?  That’s what capitalism is supposed to be about.  When they’re able to give themselves huge salaries regardless of whether they lead their companies towards success or complete failure, capitalism isn’t working the way it was meant to, and I’m pretty sure that’s not the capitalism that people like my father hold so dear.

Even if they’re rare, there are a number of chief executives who lead successful companies without living such extravagant lifestyles.  As far as I know, Warren Buffett, one of the most successful men in the world, is one of them.  Obama’s plan would be hoping to help change the culture of the self-absorbed members, not trying to sink companies in need of a bailout by sinking the self-esteem of their chief executives.  Maybe when they lead their companies to overwhelming success through good decisions and leadership, they can start making over $1 million again.

These people can’t live on $500k in this town?  I live on $50k in this town.  Maybe I should be teaching them a few things.


6 thoughts on “You can’t live on $500k in this town? Bull.

  1. This is a great post. My company is going through financial problems so they announced today that everyone, including the founder and the CEO are taking a 10% pay cut. This is instead of laying people off. Your post made me think that if the banks did this just the savings from the higher ups might be enough to bail themselves out.

  2. Am here from your link/comment on David’s chemistry poetry. Your blog is great, and looks neat too. I am so glad I clicked on the link. The Economics of your country baffles me. But your thoughts are different. If only half of the country would think this way, we would all be spared a world ‘Recession’.
    Warren Buffet should be worshipped for his economic thinking.

    Will be back for reading more of your posts, if I may.

    • Welcome! I can see how parts of our economy baffle you; sometimes they baffle me too. Most of the time I have some sense of understanding, and a much larger sense of enragement and disagreement. I used to think I should have lived in a different era; I felt this way especially during the Bush years. But now I’ve come to believe I’m in exactly the right time, and I am looking forward to the changes I expect my generation to make in American politics. Hold on tight, here come the Millenials! We know it may seem futile, we know change is hard, but we’ve got the motivation, the energy, the multicultural experience, the comfort with modern technology, and the skills to build and lead community – we WILL do what we can to make the world better and more inclusive for everyone.

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