Legal Commentary

pay caps

By Lawrence Lessig

So I'm the first to agree that the structure of compensation on Wall Street was begging for just this sort of disaster. But I don't get the wisdom of the pay cap.

The pay cap means there will be two kinds of firms -- one that can pay people whatever it wants; one that is capped (at different levels no doubt). But then the best employees from the capped firms can move to the uncapped firms, leaving the, well, not best employees overseeing the recovery of this now government invested firms.

Why do we want to be creating an incentive for not quite the best managers to be managing the recovery of firms we're financing?

Full post as published by Lessig Blog on February 05, 2009 (boomark / email).