In early June 2009, the U.S. Treasury Department appointed Kenneth Feinberg to oversee compensation packages that are offered to executives at fi rms that received signifi cant government bailout money. The companies included AIG, CitiGroup, Bank of America, and General Motors. In making the announcement, Treasury Secretary Timothy Geithner said “The fi nancial crisis had many signifi cant causes, but executive compensation practices were a contributing factor. Incentives for short-term gains overwhelmed the checks and balances meant to mitigate against the risk of excessive leverage.”
Feinberg was immediately dubbed the fi rst ever “compensation czar” and critics saw this appointment as a fi rst step toward government wage controls. Defenders saw this as a long overdue and necessary step to bring fairness to executive compensation and hoped that this practice would extend beyond only those fi rms receiving government funding.
• What consequences, good and bad, short- and long-term, can you reasonably foresee from this appointment?
• What principles might be cited to defend this position? What principles might it violate?
• What would be the virtues necessary for someone to be a good compensationczar? What vices would make such a person bad in this position?
• Should government set a “maximum wage” limit in the way that it sets a mini-mum wage?