Starve the beast

Pay is strategic. How a company pays its executives, and everyone else, says a lot about what kind of company it is. Many companies don't think a lot about it, and that says something about them, too.

These days, we hear lots of talk about whether the government should cap executive pay at the companies we bailed out. We want these companies to be different, and so controlling the pay at the top seems like a good lever to use.

But putting shackles on just these companies would be the kiss of death for them. More importantly, there's a much more effective way to deal with pay at financial companies: starve the beast.

The term applies to politics, but the strategy can work very well right now with the financial industry.

Pass a few laws: ones that we need anyway to keep these financial companies from threatening our global economy again, such as limiting leverage, regulating or outlawing some products, and separating some businesses. The result: the industry will shrink naturally, eventually fitting in like a regular citizen with the other sectors of the economy. The longer term result: salaries will normalize, and fall in line with jobs in other fields.

Some people will still make a lot of money in the financial industry, and this plan won't address the universal problems we have with executive compensation in the US. But this one beast will become tamer and thinner.