CEO Pay Curbs: A Dumb Idea

... I get why the populist notion that companies pay CEO's too much money. When you look at the amount some of these CEO's make -- even the failures -- it boggles the mind.

And, of course, I also get why a politician would want to propose capping the amount of money companies can pay CEO's. On the surface, to the average person, it sounds good.

But if your primary goal is to fix the economy (not merely to punish the rich) -- this is a stupid idea that will actually make the problem worse.

And when you put it in context, the entire notion falls apart.

Imagine telling the Washington Redskins they can only pay a head coach $500K.

While this might make all the blue collar Redskins' fans feel a tad better at first, you would be essentially ensuring that the Redskins would remain a welfare team indefinitely -- because their opponents would be out there paying top-dollar for Bill Belichick, Tony Dungy, Mike Tomlin, and Bill Parcells (even new coaches -- who come relatively cheap -- won't stick around if, after winning, they don't see their salaries increase.).

What is more, this would have unintended consequences, as the best young stars would want to go play for teams with the best coaches. So rather than helping the Redskins' fans, you would be ensuring they could not compete in the free market system.

This, of course, is essentially what President Obama is proposing to do with businesses.



For an opposing view, read: CEO Pay Curbs: A Great Idea