October 23, 2009 12:19PM

Executive Comp Restrictions Could End Up Costing the Taxpayer

The Obama administration’s announcement this week on cash compensation for those seven institutions receiving “extraordinary assistance” has generated the all‐​too‐​predictable responses. Either you think executives at the entities are bad and greedy and should be punished, or you believe this is just the first step in an all‐​out class war. Sadly the real victim in all these efforts has been, and continues to be, the taxpayer.

Now that the taxpayer is the most significant shareholder in these companies, the top priority for Washington, as representative of the taxpayer, should be to see these companies return to profitability. Quite simply, if these companies are not profitable, that loss will fall on the taxpayer, as shareholder.

And of course, without the ability to retain talent, it is all the more likely that these companies will not maintain profitability. I suspect the competitors of these seven are already eyeing their best talent. And let’s not kid ourselves, leaving these companies stocked with mediocre employees will not help taxpayers get their money back. 

In trying to punish the bailed‐​out companies, we are also punishing ourselves. This is one of the very reasons we should never have bailed them out in the first place: once we are the owners, there fate and ours are linked.