Marc Hodak blasts White House pay czar Ken Feinberg:
The nominal story is about a government official who has ideas about how individuals in private firms ought to be paid, when most everyone agrees that the way they had been paid is defective. It’s stated as a matter of fact problem-solution story. The second, more subtle story, is about a government official harnessing state power to implement his ideas. This is about the unstated premise that it’s a good idea for government officials to implement their good ideas about how people should be rewarded in companies representing a significant chink of the economy. Those who read the nominal story in its narrow sense will say, “Hey, these measures only apply to firms with significant government investment.” True enough, but that ignores the trend in government intervention in pay practices over the past couple of decades under Republican as well as Democratic administrations. The intent about this pay czar’s reach is clear:
However, the Obama administration is hopeful that Mr. Feinberg’s pay structure will be viewed as something of a “best practice” and that other firms may voluntarily seek to use similar methods in determining compensation.
And what if firms don’t seek to do so voluntarily, and generally shrug off these suggestions as they have every other government suggestion for how to structure the pay of the most sought-after talent on the planet? The trend is not good.
Kenneth Feinberg is a bright guy. He claims to have the best interest of taxpayer-as-reluctant-owners at heart:
At a speech before the Chicago Bar Association last week, Mr. Feinberg said he will not have done his job if companies react to his decisions by saying “that’s great, we’re going to lose all our people and we’re not going to be competitive.”
But ... Ken Feinberg has never designed a corporate incentive plan. He has never had his compensation ideas market-tested.
There's no reason to think this ends well.