One concern I’ve heard voiced about sharp executive compensation limits for executives at bailed-out firms is that this may cause an exodus of their most talented employees. One common rejoinder is to observe that the firms in question don’t actually seem to know very much about hiring talented employees or running a business. But another point is that I’m not sure I see why an exodus of the most talented and ambitious business minds from these firms would be a bad thing.
If you think of a talented and ambitious businessman, after all, you have to remember that you’re talking about a guy who, unlike normal people, mainly focuses his life on earning as much money as possible. That’s a weird state of mind in many ways. But it’s a good thing there are some folks like that around, because one good way to earn a ton of money is to invent a product that lots of people find useful when sold at a profitable price. None of my best friends are talented and ambitious businesspeople, but most of my favorite stuff is made by firms managed by such people. But if you’re a talented and ambitious businessman working at a government-support zombie financial institution then you don’t earn your riches by selling products to people. Instead, per Simon Johnson here and here, you maximize income by maximizing “tunneling,” i.e. “borderline legal/illegal smuggling of value out of businesses” and finding other ways to bilk the taxpayer.
If it turns out that you can make a comfortable living at zombie institutions but can’t earn big bucks there, then smart, confident, ambitious, greedy people will leave their jobs and go do other things. In a good way! Maybe they’ll start small businesses. Maybe they’ll join non-enormous, better-managed firms and help them grow and prosper. That’s the kind of thing smart, confident, ambitious, greedy people ought to be doing. Putting their talents to work in the pursuit of profitable market exchanges. Not putting their talents to work trying to run scams at taxpayer expense. What needs to happen at these firms now is a quiet, orderly, lawful winding-down of business so that the institutions themselves can be broken up and the world can move beyond this mess. That’s no kind of job for an intelligent and hard-working, yet money-obsessed, individual. It’s a job for a competent civil servant who’s happy to draw a decent paycheck to do something useful with his life.
Let the business geniuses, if any there be in these firms, get out and go do something useful.