An Uneasy Alliance


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Expert Perspective by Grahall’s OmniMedia Editorial Board

In his March 22, 2010 article for Dealbook (Feinberg to Examine Past Pay at 419 Firms in TARP) Eric Dash discloses that “..Kenneth R. Feinberg is planning to examine past executive payouts at 419 firms that received government bailout money in fall 2008… Mr. Feinberg will look at whether any of the 25 top executives at any of these firms received more than $500,000 from October 2008, when money from the Troubled Asset Relief Program was given out, until Feb. 17, when federal law limited executive pay at firms receiving TARP money…”

Let’s compare the political climate then and now. Then we had a newly elected President with an approval rating that approached 70% who demanded that Wall Street “show some restraint, and show some discipline, and show some sense of responsibility.”

Today with Obama’s approval rating under 50%, and, according to a Gallup Poll,  just 49% of Americans calling Health Care reform legislation ‘a good thing’, the climate is different.

For bankers, the days of being grilled by an angry Congress are behind them, and with their companies’ stocks and the rest of the economy on the rise, it appears that bankers – fresh off of TARP paybacks, capital enhancement and ongoing access to the Fed’s easy money credit facility – now have no trouble accepting large paychecks. 

Of course while the banks are doing better, many Americans remain out of work. With unemployment stubbornly refusing to retreat from around 10%, any large pay check given to an executive is likely to raise the hackles of the pitchfork crowd.

There is much discussion of the disparity between the pay of high level executives and that of the “average Joe.”  This disparity has always existed and over the years has grown far more dramatic – from 40 to 1 in the 1970s to more than 500 to 1 in the early 2000’s. It is now about 300 to 1, which is still a very, very big difference.

In the past it didn’t engender the outcry it does today even though the ratio was growing very fast. Why?  Well, when times are good, they are pretty good for everybody.  And although it certainly wasn’t liked by everyone, the disparity was swallowed – much like bad tasting medicine.

But now, when “trickle down prosperity” is a thing of the past, yet executive pay levels remain the same, the disparity is much harder to take.

So maybe this stuff sells papers or advertising and that is why this issue remains a hot button.  Or perhaps keeping the fires burning will help to keep executive compensation in line.  Or maybe this is a way for the pay czar to help turn attention away from the average American’s concern over health care reform and again direct their anger at the corporate executive suite. 

Whatever the outcome of Feinberg investigating the pay of the top 25 executives at 419 companies, we know two things: it won’t solve the deficit or put more Americans to work.

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