Former SEC Chairman Arthur Levitt was on Bloomberg radio this morning on my morning drive. He's normally a good guest with sound ideas. Today was a head scratcher.
Bloomberg's Tom Keene was asking him about the challenges and perception of Wall Street executive compensation at a time when the government has had to take such a large role in backstopping those institutions. Levitt's solution was - ta da - to raise base salaries for these folks.
His point is that if you plan to pay someone $1,000,000 and their base salary is only $100,000, naturally a $900k bonus is going to be unpopular with Joe Public. The problem according to Levitt goes away if you raise said employee's base to $700k. I don't think regulating compensation works, but instituting some limits in cases such as this period we're in, especially for top execs, makes sense. The way that the comp is split between base/cash bonus/restricted stock/options is not a problem at all.
Flame away.
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