October 14, 2009: What can we do about Wall Street pay?
Today, a WSJ article indicates that Wall Street firms are on track to pay employees $140 billion this year, reigniting concerns about excessive executive pay. We are not talking about secretaries here; we are talking about the top managers and traders.
I offer a simple solution to this outrage. It is an outrage because this money belongs to shareholders, yet Wall Street boards of directors have abdicated their fiduciary duties and allowed this rape of shareholder wealth to continue, even in the shadow of Wall Street's 2008 meltdown.
My solution? Simple. Let the boards rip off shareholders as much as they want, but ensure that most of that money goes to the taxpayer rather than top managers and traders.
Supposedly, we have a progressive income tax in this country, yet the top rate is only 35% and kicks in at the relatively modest income of $357,700. (Modest relative to the multi-million dollar paycheck of Wall Street, not the the paychecks of Main Street and "Flyover Country.")
I propose we add a few of additional brackets:
50% at $1 million,
75% at $5 million and
90% at $10 million.
What would this accomplish? It would make it VERY expensive for the likes of Rubin or Mozillo to rip off shareholders as they did at Citibank and Countrywide, respectively. It would force directors to "just say no" to such payoffs, as it would cost companies ten times as much as it does now for the biggest of paychecks.
It would not deter investment, as it long-term capital gains would still enjoy a favorable rate of 15%.
