Bailout CEOs: Make Them Share Taxpayer Risk

When taxpayers have to take a stake, CEOs should have to do the same

By Clay Dillow, Newser Staff

Posted Dec 2, 2008 12:36 PM CST

(Newser) – As taxpayers become stakeholders in the very firms that made this economic mess, it’s become easy to say that losing CEOs should be stripped of their salaries, writes Andrew Ross Sorkin in the New York Times. But driving out good CEOs is no way to rebuild the banking sector. So here’s an idea: When taxpayers invest in a firm, make executives invest in it as well, and on the same terms.

To balance fair pay and retention of talent, make CEOs take the kind of long-term stakes in their companies taxpayers are taking, and make them invest in all the financial products their companies sell. “If executives had put their own money into the tricky mortgage investments that their banks were selling, they might have asked hard questions from the start.”

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The best way to keep CEOs, like embattled Citigroup CEO Vikram Pandit, honest isn't to cut their salary, but make them invest it under the same terms as taxpayers. (AP Photo/Citigroup, file)

When firms like Citibank are foundering and taxpayers take a stake, what is the appropriate way to compensate executives that many feel are doing a bad job? (AP Photo/Craig Ruttle)

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By itself, more share and retention-based compensation is not the magic bullet, because it certainly didn’t stop us from running up very large losses.
- Winfried F. W. Bischoff, Citigroup's chairman

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Bailout CEOs: Make Them Share Taxpayer Risk