Wondering About Executive Pay

I’ve been fighting a nasty cold this week, and thus blogging and reading less on the internet and watching much more TV than usual. The experience has reinforced my low opinion of the value of television news as information.

But this really, truly is going to be a short post. I mean it.

There are lots of good questions regarding the auto industry bailout, such as why we’re willing to bail out the financial industry but not the auto industry. How about doing none of the above?

But here’s my question. What is sustaining the high rate of executive pay? We have very highly paid executives, making in the millions, riding companies down to failure. It seems to me one could hire a recent business school grad, for example, who would be willing to ride the corporation down in flames for considerably less money. If these guys were that much smarter, i.e. as smart as their pay would suggest, one would think they would have greater success.

There seems to be something other than the market working here, but I can’t quite see what it is. Perhaps it’s simply a disconnect between the boards that hire the executives and the people who don’t buy the product. But normally that kind of reward should come from some kind of great performance.

In reality, of course, the amounts of executive pay are just a minor portion of the money that is being poured into bailouts. But the principle, I think, may be much larger. High rewards are being paid for failure. As consumers and as voters, that is something we need to oppose, irrespective of the amounts of money involved.