President Obama announced that Kenneth Feinberg will become the nation's "Special Master" for compensation (I call him the comp cop). Feinberg is the fellow who got to decide that the life of a bond trader murdered on 9/11 was worth, say, $6.8 million, while that of a firefighter who perished that day merited 1.8 percent of that amount. Now he gets to step into the emotional firestorm of setting pay for 100 executives whose companies got TARP money.
This is a great way to focus public anger on a single individual for the failure of our system of corporate governance. Before getting into four reasons why I think the comp cop is a bad idea, it is worth pointing out that thanks to a new "say on pay" scheme -- which will give shareholders a non-binding vote on how executives are paid -- there is a chance that the system might improve. That's because one pay consultant thinks it might result in putting "part of their bonuses in escrow for three to five years" -- an idea which I have been writing about for years.