GLEN COVE, NY — The pay czar is going to cut the
pay of the top executives at companies that took bailout money (or
even those at companies on whom the government forced bailout money,
much as press gangs used to force the king's Shilling on reluctant recruits
for the British Army and Navy). The cuts are going to be for a maximum
of 90 percent, while the mobs cry out for these executives to work
for nothing as punishment for their companies’ failures.
That wage controls are ineffective, immoral, and just plain un-American
has been proven far too many times for me to prove it once more. The
particular proposals being put forward, however, have a peculiar absurdity
that deserves comment.
Every job has its pay. Pay is higher for a bank president than for
a teenager who bags groceries. It is also higher for a bank president
than for a vice-president at the same bank, and higher for a president
of a banking corporation operating in 50 states with representatives
in Hong Kong, London, and Paris, than for a president of a bank with
a dozen branches. The threatened czarist pay cuts are aimed only at
the largest companies and banks and only at top management. Nobody
is talking about cutting the pay of branch managers.
Wages of jobs in management are negotiated. A free market determines
them. When czars thwart the invisible hand of the free economy, that
hand becomes an invisible fist and starts smashing things.
In practice, this process will work like this. The highest ranking
dozen executives of a big international bank will be told that the
government is going to cut their pay and other benefits by 90 percent.
They will immediately begin shopping around for a job in the banking
industry that pays more than 10 percent of their present pay and is
not subject to the czar. Some will no doubt find banks that only operate
in one region of the country in need of presidents. These banks will
be delighted to acquire talent far above that typical for their size.
There may even be a ripple effect, sending regional bankers to state-wide
banks, and state-wide bankers to community banks.
The large international banks will soon learn that they simply cannot
get the kind of talent they would in a free economy because nobody
of that caliber wants to operate in a climate of fear that the czar
will cut the negotiated salary down to 10 percent of the agreed amount.
The next phase of the iron fist’s revenge will be that the
quality of management of the regional banks will be better than that
of the international ones. The regional banks will grow and become
competitors of the big ones, while the big ones will make mistakes
because they cannot get the talented management.
Eventually, we will wind up with a banking system in which the power
of the czar will extend only to the banks that were big during the
first decade of the 21st century, not to the ones that grew more recently.
If you think that common sense will prevail and the banks the czar
has ruined will be set free, just ask the members of a city council
whose redistricting is still subject to the approval of the Attorney
General because they are in one of a handful of states with a participation
rate of less than 50 percent in the 1964 election.
The Confederate Lawyer column is copyright © 2009
by Charles G. Mills and the Fitzgerald Griffin Foundation, www.fgfBooks.com.
All rights reserved.
Charles G. Mills is the Judge Advocate or general counsel for the
New York State American Legion. He has forty years of experience in
many trial and appellate courts and has published several articles
about the law.
See his biographical sketch and additional columns here.
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