The Metropolitan's New Website

*I have done a lot of posts so make sure to check out the older ones.

Anyway, I am a writer for the Metropolitan (more commonly known as the Met).

It is a weekly publication that covers happenings on at Metropolitan State College of Denver where I am the beat writer for hockey and baseball. I am also the assistant sports editor. However, most importantly to you I also write regular economics column - I am an economics major not a journalism major.

You can check out the website which is updated weekly at http://www.mscd.edu/~themet/. Click on sports for sports articles and insight for my column. You can also scroll down to the bottom of any of my articles and click my name to see all of them.

* I might also be a regular guest on Metro's politcal radio program which you can access http://metradio.mscd.edu/

To give you a taste I will copy and paste this week's economics column:

Wednesday, February 11, 2009
Opinion

Robert Dran
rdran@mscd.edu

You can count me out of the populist rhetoric when it comes to executive pay. Surely taxpayers have a right to be angry at the use of their hard-earned money going to corporate bailouts. However, all the talk that executives are overpaid only covers up the government's inadequate management of the bailout. As much as us poor folk like to show malice to those richer than ourselves, there is actually no good economic reason for it.

Ironically, Obama's executive order to cap the salaries of corporate executives is the best way to end the bailout. This may sound odd at first, but there are solid incentives behind this argument. In order to end the government bailouts, there needs to be a disincentive for the companies to accept the bailout. Well, limiting salaries is a massive disincentive to receive government bailout money. The investors are better off kicking the bad executive out and bringing a good one on board to fix the company. The public's anger should be directed at Former Treasury Secretary Henry Paulson and Former President George W. Bush for encouraging bad management – not corporate boardrooms.

First, it’s probably best to explain why corporate executives get paid so much. The reason is there aren't a lot of executive quality people. For all the MBAs out there, there are still too few people with the skills and experience to run a multi-billion dollar corporation; therefore the supply of available corporate executives is pretty small. On the flip side, there are a lot of companies out there looking for good CEOs, so if you need some good management, you have to pay for it. In a free market, corporations punish other corporations for paying their executives too much or too little. Too much and the company is less efficient than its competitors. If they pay too little, then the executive has an incentive to leave for another company. As the saying goes, good help is hard to find.

Does this mean executive pay is always perfectly in line with supply, demand, efficiency and needs? The answer is no. The fact is when you are a corporate executive of a large company you are in charge of billions of dollars. So getting a few million to manage several billion really sounds like a pretty good deal. But if management fails to manage well, then it's the company's fault. It is not the government's responsibility to patrol every company to make sure they are not overpaying. In fact, the reason we have this financial crisis is that the government has gotten too involved with how the market works. Government promotes poor management of companies. One great example is the failure of the Securities and Exchange Commission to stop Bernie Madoff – the guy who made off with investors' money. Investors have the false belief that they don't have to monitor the company because the SEC is doing it for them while the SEC is actually in cahoots with Bernie rather than the investors they were "meant to protect."

So, you might ask, why do bad executives get paid so much money? Good question. Bad executives get paid a lot of money to leave companies – golden parachutes. If you are in a high-demand market, then you have the right to demand a certain amount of financial security. If things go wrong then the company simply pays you to go away. Executives have a lot of power, but they are responsible to their shareholders. However, if you have a bad executive and you fire him, instead of paying him to leave, the executive will fight and you get a lot of chaos and disorder, which is bad for the company. So instead, you pay the executive to go away and the shareholders can install a new executive. This works because the shareholders get a new man in charge with no boardroom fighting and the executive gets paid for his time and avoids a corporate war.

Who thought poor executive management could be solved through bribes? Just because there are bad overpaid executives out there, that does not mean there are monopolies – the government – needs to make things more efficient. The concept of large companies taking away jobs is simply incorrect. The fact is more than half of all jobs come from small business. Most sources of information put it at 80 percent of total jobs.

I will agree, though, taxpayer money going to bonuses for boneheaded executives is insulting. Nevertheless, this is not the corporation's fault: it is the government's. Paulson and Bush are the ones to blame for handing out this money. The bailout was a horrible idea. There is already the FDIC, which federally insures bank accounts in case a bank collapses. For you and me there is no reason to bail these guys out. Luckily, Obama is unintentionally killing the bailout with the limits on salaries.