A matter of 'fairness'

The Obama administration will order companies that haven't repaid their government bailouts to cut top executives' average total compensation -- salary and bonuses -- in half, starting in November. Under the plan, cash salaries for the top 25 highest-paid executives will be limited to $500,000 and, in most cases, perks will be capped at $25,000.

(Since the step was delayed till Goldman Sachs Group Inc. and JPMorgan Chase & Co. paid back the money they received, they'll be exempt.)

The Federal Reserve came at the issue from another direction this week, proposing to monitor pay packages at thousands of banks -- even those that received no bailouts.

Kenneth Feinberg, special master at Treasury appointed to handle compensation as part of the government's $700 billion financial bailout, is making the pay decisions. Rumors that chicken entrails are being examined, and Ouija boards consulted, have not been confirmed.

The seven bailed-out companies are Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial.

Now, most of these firms bellied up to the bar and accepted billions in federal "bailouts," so they have little to complain about. If the pay cuts eventually lead to their failures, that will simply be a delayed version of what would have been best for the overall economy in the first place.

Though David Yermack, a finance professor at New York University, predicts the seven firms would find ways to bypass the curbs through implicit promises of future bonuses that aren't written into contracts.

The bigger question is whether -- having tasted the delights of being allowed to impose "fairness" with a stroke of the pen -- Washington will be content to stop here.

After all, how many large firms or institutions can say they haven't received some benefit, some tax break, some contract or subsidy from Uncle Sam? (Witness the Fed and the banks.) Wouldn't any of those justify Washington further extending this campaign of voter-pleasing "fairness"?

"Where does this inane government intervention end?" asks Republican Study Committee Chairman Rep. Tom Price, R-Ga. "While history and principle have long proven that private markets are where prices are most efficiently set, this administration has decided that there is no question which bureaucrats cannot answer."

David M. Mason, a senior visiting fellow in the Roe Institute for Economic Policy Studies at The Heritage Foundation, offers a different prescription:

"Rather than dictating private-sector pay, policymakers should re-examine the pernicious effects of existing tax incentives on executive pay. ... Policymakers should make government policies neutral as to pay structures and allow private-sector owners and managers to design differing pay systems for different companies and objectives."

Nah. Too complicated. How about: "Waaah! Sissy got a bigger lollipop than mine. It's not fair!"?