On Thursday, the inspector general of the Federal Housing Finance Agency (FHFA) released a devastating report on executive compensation at Fannie Mae and Freddie Mac in the wake of the government’s $153 billion bailout of those firms. CEOs Michael Williams and Charles Haldeman received a combined $17 million for 2009 and 2010. The firms’ top six executives earned a combined $35 million over that period.
Saying it is excessive in the context of the bailout suggests that this level of compensation might be acceptable in another context—perhaps if Fannie and Freddie had not needed a bailout. That puts us on a slippery slope because there are other corporations in America that did not receive bailouts. Is it acceptable for executives of those corporations to pay themselves tens of millions of dollars in compensation? See what I mean about framing?
Rather than frame executive compensation at Fannie and Freddie in the context of the government’s bailout of those firms, let’s frame it in the context of another study that was released on the same day. USA Today reported that median CEO pay rose 27% in 2010, to $9 million. That is disgusting.
Some may think this is how capitalism works, but they delude themselves. Grasping CEOs and the entrenched boards that pamper them have nothing to do with the capitalism of Adam Smith. They resemble more the corrupt nobility of Machiavelli. Call them pigs, or call them leaches. They are on the wrong side of history.
Michael Williams and Charles Haldeman aren’t a separate issue. They are part of the same problem.