Bonus caps for executives won't help

President Obama wants executive pay caps at TARP-funded companies, but it isn't looking good. According to the Wall Street Journal, "The Obama administration is dropping its plan to cap salaries at firms receiving government bailout money, leaving them subject to congressionally imposed limits on bonuses, according to people familiar with the matter."

The plan could cap bonuses at one-third of overall compensation. This is a bad idea because it produces the exact opposite of the pay for performance culture that is the hallmark of that very rare phenomenon known as strong corporate governance.


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