The Obama adminstration yesterday nominated attorney Kenneth Feinberg to the newly created post of "compensation czar" from which he will help the government, as Treasury Secretary Timothy Geithner said, "rein in pay practices that motivated executives to take excessive risks in pursuit of profit."
This will surely be popular at first blush: The outrage over executive compensation and bonuses at companies that were simultaneously begging for federal bailout money is still fresh in Mr. Geithner’s memory. Rewarding people who had run their own companies into the ground seemed perverse to the American taxpayer because it is perverse. This is not merely a question of divergent interests but of comparative justice. The administration also proposed legislation that would give shareholders a more direct role in setting executive compensation and the SEC more authority to ensure that corporate committees that set executive pay are truly independent of the company’s executives.
There is a fine line here. Americans certainly felt a sense of revulsion at the indifference of pay packages to performance: CEOs got rich whether their companies prospered or not. But, Americans were ambivalent about the pay packages themselves. Now, they use words like "excessive" to describe these compensation packages, but the glamour of wealth, and Americans’ endless fascination with it, kept most Americans from objecting until the economic downturn. We were too busy flipping through the pages of "Architectural Digest" which was a great magazine about architecture when I was a boy growing up but became, in the last decade, a kind of materialist pornography. There was a television show, "Lifestyles of the Rich and Famous." Donald Trump became a celebrity.
Neither do Americans want government officials intruding into the specifics of running companies and I suspect that the Republicans will use this latest appointment to portray Democrats as embodying "the nanny state."
There is a better alternative to the creation of a compensation czar. Raise taxes on the super-wealthy. American rates for high-end earners remain low by comparison to European standards which, in the Western democracies, run from 40 to 55 percent. Complaints that Europe’s economies are always somewhat anemic compared to America’s cannot obscure the fact that their growth rates may lag slightly behind American growth rates, but they achieved that growth while simultaneously achieving a more just and humane society. Government funded health care, shorter work weeks and more vacation time so that families can spend time together, less expensive higher education, etc., these are the hallmarks of a more just society. And I know just the people to pay for it: the rich.
I always go back to Arthur Schlesinger Jr.’s description of American liberalism in "The Age of Jackson" in which the great historian argued that while the moneyed interest is normally the most powerful in our free society, it is the historical calling of liberalism to use the power of government, the only actor powerful enough to stand up to the moneyed interest, to pursue those social goods the moneyed interest has ignored or betrayed. We should raise taxes not only to change the culture of executive compensation, but to fund health care, lower education costs, and in various ways make America a more just society. And, go ahead and cancel that subscription to "Architectural Digest."