The 80Th Anniversary Of The Great Crash Of 1929: Law, Markets, And The Role Of The State

DOW BREAKS 10,000 (AGAIN), WALL STREET PAYS HUGE BONUSES (AGAIN)

By Geoffrey Rapp on October 15, 2009 - Comments(0)

Today on the "Today" show, a story aired on the Dow breaking 10,000 for the first time since 2008, and recently-bailed out Wall Street investment houses once again paying massive bonuses to employees. Michael Moore is, of course, offended. How can executives of firms so nearly dead just months ago be worth this much? At first blush, it's hard to imagine that anyone who can't hit a curve ball out of a baseball park, sing like Beyonce Knowles, or perhaps turn water into wine should be entitled to eight-figure pay. Is the "marginal revenue product" of such business tycoons really as high as their pay? Comparisons between executive compensation in the United States and Europe may call that into doubt. Ultimately, executive pay in the country is so high because the only check on executive compensation comes in the form of corporate boards. Guess who sits on such boards? Predominantly, other executives. Though board members may have no conflict of interest in approving salaries of leaders of firm that don't employe those board members, it seems clear that they have a vested interest in sustaining the notion that top executives really could be worth this much. Could the bailout change all that? In spite of the sabre rattling in Congress and from the White House on executive compensation, it seems like policymakers lack the tools or the will to implement real reforms to reign in top earners' compensation.

Tags: Dow Jones Wall Street
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