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If Wall Street executives are truly overpaid for the profit they produce, you don't have to complain -- you can just profit from it! Simply short Goldman Sachs (which pays its employees far more than anyone else) and buy shares of a smaller bank.

That way, instead of feeling like the world is unjust, you can feel like there are popular misconceptions which you can simultaneously profit from (when Goldman's price drops because it's overpaying employees) and alleviate (Goldman drops when you short it; the bank whose shares you buy goes up).

And of course, you get a boost to your argument. It's going to sound less like "I resent people who can make more money than me," and more like "I think there's an economic inefficiency here -- and I'm prepared to stake money on whether or not I'm right."

The problem is that Wall St. makes money by taking big risks and passing the losses on to the taxpayers. What would Goldman's profits be without the TARP bailout and the AIG bailout? I suspect Goldman would not have survived.

Of course, the solution is not to regulate pay, but to allow the big banks to fail ( I think the whole too big to fail argument is a lot of hooey, there a lot of ways to allow a bank to fail without causing contagious destruction).

At that point, you should be complaining about the bailout money (which you've identified as the actual problem), not the bonuses (which you now seem to be claiming are a result of the problem). Arguing against bonuses due to TARP amounts to saying "The mortgage bubble -- propelled by massive government intervention -- has popped. The bailout, another massive government intervention, has had disastrous consequences. The obvious solution is more massive government intervention."

At some point, it has to stop. So I agree -- let the banks fail.

Most people seem to regard corporations as moral entities.

These companies screwed up. We bailed them out. We expect them to lower their heads in shame, tighten up their belts, ask forgiveness, and promise to not do it again.

When they don't act according to our "moral" expectations, we turn everything into a public spectacle, articles start pouring in, blogs are on fire with outrage etc etc..

The problem is that we screwed up at the first step -- companies are not moral entities. They like to present themselves as such (ex. Google's "Do no evil, except when you have to turn in a couple of Chinese dissents over to their government to be imprisoned for life...")

You may enjoy this article as it offers an interesting generalization of your thesis:

http://www.atimes.com/atimes/Global_Economy/JK25Dj06.html

> compensated incredibly well for very incredibly poor performance

Sort of. They tend to be compensated well, right up until they're fired. The analogy someone else made to sports coaches is an apt one; if a team loses a few games, the coach doesn't get his pay docked, but if a team loses for a few seasons, chances are he'll just be out of a job.

Plus, in many cases it can be hard to determine whether a CEO's actions led directly to a poor quarter, or if it was just a bad quarter and they handled things appropriately. And if pay was tied directly to financial metrics, there would be an incentive to play the numbers game.

It's important also to remember that the people determining a CEO's salary -- or at least giving it the thumbs-up -- are typically the biggest owners of a company; the CEO's pay comes out of their pockets in greater proportion than it does anyone else's. If they think that their CEO is doing a ten-million-dollar a year job, who is anyone else to argue? If they thought they could get someone to do the same job at half the salary, doubtless they'd do it; I doubt they enjoy spending that much, but they think it's necessary.

You're confusing completely separate issues.

Executive compensation is the issue of outrageous salaries paid to the CEO and top few individuals in a company. As a culture we've come to forget the the CEO of a public company is generally a caretaker, not an owner. And complications around corporate governance make it hard for shareholders to make their ire felt.

Wall St bonuses is the result of a culture that has arisen among very performance driven people who deal with large sums of money. Because you want them to perform, and can measure performance, you want to reward them for their performance. Which means paying salary, not bonuses. Because they regularly handle large amounts of money you want them to be honest. Which means you need to reward them well enough to make them hard to bribe. This naturally leads to outrageous amounts of compensation, which is largely delivered as bonuses.

So the first issue is a case of widespread poor corporate governance, while the second issue is a very unequal, but economically efficient, way to operate in certain lines of business.

> This article doesn't really seem to acknowledge the fact that many executives have, and continue to be, compensated incredibly well for very incredibly poor performance.

Think of it like being the coach of the St. Louis Rams. Your team performs poorly, and you get paid well. Ultimately, if it's your fault, firing makes more sense than a pay cut.

> The argument the argument makes that companies need to pay so much money to maintain top talent seems like an argument in favor of regulation.

If there's a salary cap, then they might lose some top talent to startups (or the legal profession, or ...).

Devil's advocate.

> The argument the argument makes that companies need to pay so much money to maintain top talent seems like an argument in favor of regulation.

Oh really? How is the US govt going to regulate what a Chinese bank pays?

You clearly believe that bankers could be paid less and deliver comparable results. Great! Set up a bank and prove it. If you're correct, you'll get rich, which will let you do other good, and you'll drive stupid banks out of biz.