Thursday, 5 November 2009

The virtues of limiting executive pay

Yes there are virtues to limiting executive pay. Bruce Yandle makes the case in his article, Regulating Executive Pay Can Reduce Systemic Risk: If they are the right executives,
Yes, it is high time that pay and investment guidelines be mandated for all top level executives who may in the normal course their daily work push the entire economy too close to or even over the edge of systemic risk falls. If nothing else, this Great Recession has taught us that top executives can practically capsize the economy.

But the chief concern is not with presidents and vice presidents of too-big-to-fail banks and other bailed-out enterprises. As large as they are, they are small potatoes relative to the big generators of systemic risk. The critical concern is with top government executives who can create national and international panic, lay the groundwork for international inflation or deflation, and just by voting and writing regulations can change the risk profile of entire industries.
In other words limiting the effects and the creation of regime uncertainty can only help the economy.

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