I’m guilty of usually seeing the world through a rigid prism of right vs wrong. But I think that’s understandable since I’m often writing about clear-cut issues such as the corrupting nature of big government or the foolishness of class-warfare tax policy.
But I periodically come across topics where I’m not sure about the right answer. So I throw these topics out there to see what other people think.
Previous editions of “you be the judge” include: Putting politicians on trial, vigilante justice, brutal tax collection tactics, child molestation, sharia law, healthcare, incest, speed traps, jury nullification, and vigilante justice (again).
Now I’ve come across another example. Over in France, the socialist government says it wants to impose pay caps on corporate executives. That seems like a very bad idea, but there’s a catch. The proposal applies to government-owned companies.
Here’s a description from the Financial Times.
France’s new socialist government has launched a crackdown on excessive corporate pay by promising to slash the wages of chief executives at companies in which it owns a controlling stake, including EDF, the nuclear power group. …According to Jean-Marc Ayrault, prime minister, the measure would be imposed on chief executives at groups such as EDF’s Henri Proglio and Luc Oursel at Areva, the nuclear engineering group. Their pay would fall about 70 per cent and 50 per cent respectively… The government also wants to pressure other companies in which it owns a stake to follow its lead, even though it has no legal power to force such a change. France is unusual in that it still owns large stakes in many of its biggest global companies, ranging from GDF Suez, the gas utility; to Renault, the carmaker; and EADS, parent group of passenger jet maker Airbus. Mr Ayrault said he “believed in the patriotism” of company leaders and their willingness to share the country’s economic pain.
The analogy that pops into my mind is Fannie Mae and Freddie Mac. Those government-created entities (before the crash) were used as piggy banks by members of the political elite, who would take a break from climbing the ladder in Washington and spend a couple of years raking in millions of dollars by overseeing subsidized mortgages.
So even though I’m completely opposed to salary controls on the private sector, I don’t view government-owned and government-subsidized companies as being part of the free market.
But I also worry a lot about slippery slopes, so here’s my thought process.
- I fully support pay caps for government-owned entities, such as the Postal Service. Indeed, I assume those already exist.
- And I like the idea of pay caps for government-subsidized entities, such as Fannie Mae and Freddie Mac. I don’t know if there is a limit now, but if one exists, it’s way too generous if this story is any indication.
- But I get nervous about subsidies being an excuse for government regulation of executive pay, even when I’m disgusted when big business gets in bed with big government. This is why I was so conflicted in this interview about pay caps for banks getting TARP bailouts.
- Moreover, I’m instinctively opposed to pay caps on companies that have contracts with government, though obviously my views are affected by whether a contract deals with a legitimate function of government (buying a tank) or whether it’s a festering waste of money (paying a politically connected PR firm to boost the image of the IRS).
- Last but not least, I get very scared that politicians inevitably will take a good idea and turn it into a bad idea. In other words, if we give them the power to do something reasonable, like regulate pay at Fannie Mae and Freddie Mac, they’ll probably get intoxicated by power and decide they should be able to control compensation levels at genuinely private companies.
So what’s the right answer? If we’re allowed to fantasize, the obvious decision is to shrink government to its legitimate size so there aren’t any government-owned or government-subsidized companies.
But if we’re forced to deal with the world as it is today, then the choice is much more difficult. If we oppose pay caps, then political insiders can use cronyism to get undeserved payouts. But if we endorse pay caps, then we’re giving politicians power that almost surely will be abused.
If you put a gun to my head, I guess I would oppose pay caps. But I hate saying that since few things are as outrageous as rich people using the coercive power of government to take money from those with less.