The Pay Czar Strikes Again!

Treasury Department pay czar Kenneth Feinberg last week announced sharp cuts in total compensation at the finance and auto companies under his control. But while he cut total compensation by half, he substantially increased one important element, regular salaries. The move reflects the complexity of regulating something that mixes politics and economics.

Mr. Feinberg oversees seven firms that accepted bailout packages:

1. American International Group Inc.

2. Citigroup Inc.

3. Bank of America Corp.

4. General Motors Corp.

5. GMAC Financial Services

6. Chrysler Group

7. Chrysler Financial.

Is this smart? Is this effective? Is this even American? I say, “no” on all three counts! My over twenty years as a recruiter tells me that supply and demand works! Trying to control salaries is not smart. This is something one would expect from a socialist or communist country. Furthermore, it is not efficient from a market standpoint. The supply for top-notch executives capable of bailing out these seven firms is very small and the demand is very high. Therefore, staffing experts at these firms need to do everything possible to recruit the best and brightest. Tying their hands in the employment process is not what they need in such a critical moment in their existances.