Here's a piece from the WSJ on the latest intervention into the market for executive compensation:
…[The] government disclosed that it had set limits on executive pay for 2008 at state-owned financial companies, the latest effort to address public concern over pay at companies controlled by the country's nominally socialist government.
Total compensation for last year was capped at 90% of the amount executives received in 2007, the Ministry of Finance said in a brief statement. For companies whose revenue fell last year, the limit was set at 80%, it said. The statement, issued late Thursday, said the new rule had been issued "recently," but didn't elaborate. A ministry spokesman declined to comment Friday.
Need I tell you that the story is about the communist party and China? Sadly, I think I do need.
Hat tip to Helen Yang.
The owner of a company exerting influence over the payment to top executives? Those filthy communists!
My chinese is a little rusty, but the name of the party is “ä¸å›½å…±äº§å…š” and “共产” translates to “communist.” With “communist” in the name of the party, “nominally communist” seems more accurate than “nominally socialist.”
Which is the communist part: state ownership or pay cap?
C’mon, Alex. You can reason better than this. It’s no argument for the badness of a policy that a communist country does it, even if we think communism in general is bad. Indeed, it’s no argument for the badness of a policy even if it’s a policy decided upon because it follows directly from communist doctrine. Presumably, communism is bad (if it is bad) because its policies are bad, not the other way around.
This is especially the case since China is, after all, in the midst of becoming a world economic powerhouse. Clearly, anything China does is dumb!
On average what percent of corporate profits/income goes to high executive compensation?
Furthermore I challenge Mr. Tabarrok to explain what exactly is the market mechanism which sets executive compensation at the optimal level. In particular, how does “the magic market” decide on itself that the compensation is too high and should be lowered.
There are communists in China? Who knew?
Why is it an intervention into market? The state is the owner, it can set executive pay at whatever level it wants since this is the exercise between owner and employee.
If the private owners were to have this arrangement with its employee, we wouldn’t call this intervention into market, we would just called it change in demand for labor. Since the state is using the its right the same way as the private owner would has used, why is it an intervention into market?
nice article,i agree with it
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