Timothy Geithner, US treasury secretary, said on Monday he opposes caps on executive pay in companies receiving bailouts from the federal government under the Troubled Asset Relief Program (TARP).
Geithner, speaking at a live broadcast interview hosted by Newsweek, made a number of notable remarks, including the claim that the economy has “clearly stabilized” despite the daily growth of unemployment and other indices of social distress. However, his comments on executive compensation stood out most of all.
Geithner, who said he received a “generous salary appropriate for a public servant,” was asked if “it would be a reasonable proposal that companies receiving TARP money should [have their executive pay] capped at what the secretary of the treasury makes?"
“No, I don't think so.” Geithner replied. “I don't think our government should set caps on compensation.”
Well aware of the popular hostility towards the banking executives, Geithner attempted to qualify his statement, adding, “What I think we need to do is set in place some broad constraints on the incentives compensation systems created.”
“We can bring about broader reforms... that will make it less likely that people will get paid to take large amounts of short-term risk at the expense of their firms and at the expense of the system as a whole.”
The only such “reform” mentioned by Geithner was his proposal that “companies submit to shareholders their broader compensation packages.” Such a proposal is ridiculous. Shareholder votes are, of course themselves monopolized by multimillionaires and billionaires, who are perfectly happy to let their colleagues rake in tens of millions of dollars in compensation every year, knowing full well that they will receive the same treatment.