Would be interesting to see the details, you know...where the "devil" is

Yesterday it was announced that any of the banks taking government money will need to limit exec. pay to 500K. This is a reasonable proposition but in practice will most likely result in what is know as an operating environment. An operating environment is similar to a non profit but what actually happens in an operating environment is the company gets bigger and bigger but returns nothing to the market. For example if I ran a non profit charity and made 1Mil. in collections and have a charter to distribute 40% to charity then I have 60% (600K) to run my operation (salaries, expenses, fixed costs etc.) As my non profit gets bigger 2Mil. sure the 40% figure goes to 800K but my operation, which may not have gotten any bigger, is now collecting 1.2Mil to allocate as noted above.

What does all this mean???

It means this: Executives will take the 500K and have an unlimited expense budget which they will use to "Operate" the business and every other aspect of their lives. They won't buy big houses they will lease them, they won't buy a jet they will lease it. The company can decide what they will allow the Exec. to expense...Groceries? sure it really doesent matter what they actuall expense what matters is that their accountants sort through what can be written off to uncle sam (us) and what the company has to absorb.

So the Exec. keeps and banks every dime of his 500K and his expenses for FY 09 were 12 million of which the company wrote off 2 million and absorbed the other 10 million.

Funny though the company only made 12.5 million...so what's coming back to us?

We all know the answer to that one.