You know Wall Street executive pay is too high when…

November 12, 2009 – 8:40 am – No Comment

bill gates

There are plenty of people across the country as well as around the world who have something to say about the United States economy and Wall Street. The two have been skipping down the recession highway hand-in-hand for the past year and everyone sees it.

Executive pay is one of the things that gets a lot of people particularly fired up and you really know that the executives are making too much money when Bill Gates says they are.

Gates had this to say, “It was a bad milestone in controlling executive salaries when that $1 million cap went on. The compensation problem is a very interesting problem. I do think compensation is often too high, but it’s a very tough problem to solve.”

The cap he is talking about is a $1 million cap in executive pay that went into effect in 1993. Since the cap was put in place, companies have found other ways of showering their executives with gifts and other things such as lucrative stock options. The stock options were often worth FAR more than a year’s salary at one of the companies would have been.

The $1 million limit on salaries encouraged companies to instead give executives lucrative stock options, sending pay to vast new heights.

Gates also worries about the government’s control of AIG, “I do worry that when the government owns an entity like AIG that you can greatly devalue that entity by having it essentially have to behave as though it is part of the government. It is an unnatural situation when the government owns a lot of a private company. Unfortunately there is a view that it should exist for a long term. There is some devaluation of what that asset would have been worth if it hadn’t had to go through that kind of management structure. It is unavoidable.”

Bill Gates is one of the people who benefit from lucrative stock options with his company (which he stepped down from to focus on philanthropy). However, I do not see Microsoft taking down the entire United States economy like the banking industry did.

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