The problem with limiting executive pay

Interesting, no?

Even as he has been lambasting the government for its handling of A.I.G. after its near collapse, Mr. Greenberg has been quietly building up a family of insurance companies that could compete with A.I.G. To fill the ranks of his venture, C.V. Starr & Company, he has been hiring some people he once employed.

Now, Mr. Greenberg may have received some unintended assistance from the United States Treasury. Just last week, the Treasury severely limited pay at A.I.G. and other companies that were bailed out by taxpayers. That may hasten the exodus of A.I.G.’s talent, sending more refugees into Mr. Greenberg’s arms, since C. V. Starr is free to pay whatever it wants.

“Basically, he’s just starting ‘A.I.G. Two’ and raiding people out of ‘A.I.G. One,’ ” said Douglas A. Love, an insurance executive who has also hired A.I.G. talent for his company, Investors Guaranty Fund of Pembroke, Bermuda.

While America generally loves stories of entrepreneurs making a comeback, Mr. Greenberg’s success may be at the expense of taxpayers. People who work in the industry say that if he is already luring A.I.G.’s people, he may soon be siphoning off its business and, therefore, its means to repay its debt to the government.

So what if there really is a market for \”executive talent\”? Deliberately limiting pay at those companies (part) owned by the taxpayers ain\’t gonna do all that much good, is it?

7 comments on “The problem with limiting executive pay

  1. Remember, the Obama Administration has never said it wanted talented executives working at AIG, GM or Chrysler. What it has said is it just wants to ensure the executives there do not receive excessive compensation.

    Two different issues, really.

  2. Matthew

    There shouldn’t be any need for a government guarantee of the new firm. Presumably he’ll hire all the competent people from the old firm.

    AIG will need government guarantees forever, though.

  3. Brian – why would his new firm be any different from his old firm?

    Tim adds: Well, perhaps because the problems at AIGFP rather happened after he’d left AIG in 2005?

  4. I’m giddy with anticipation to see what marvels these financial magicians conjure for us this time. Carbon will likely be involved.

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