Legal Commentary

Unintended Consequences

By davidwanetick

Decision makers must be aware that their policies often have unintended consequences.

Executive Compensation   One example of unintended consequences is associated with the requirements for senior executives of publicly-traded companies to disclose their compensation. Initially, the thinking was that the disclosure of executive compensation would make it easier for shareholders to pressure senior executives to reduce their compensation, at least during periods faltering company performance.

However, the opposite happened: CEO compensation rose dramatically after these disclosure requirements went into effect. The unintended consequence was that CEOs were able to seize on the wealth of public information about the compensation of their peers. Such disclosure requirements enable CEOs to argue that their compensation should at least be commensurate with that of their peers, especially during times of similar performance.

YouCut  As much as I hate to admit it, I believe that there will be unwanted unintended consequences with Rep. Eric Cantor's initiative YouCut. I couldn't agree more that government spending is out of control and that Congress needs the American electorate to pressure Congress to reign in its irresponsible spending. (I happen to live in the congressional district of arguably the most fiscally irresponsible member of the House of Representatives, Rush Holt. I see Holt basically using taxpayer money to buy votes for his reelection by earmarking wacky boondoggles for his supporters.)

YouCut has the best of intentions. The basic idea of YouCut is that Americans can vote on which government programs should be cut. YouCut offers Americans the opportunity to voice their ideas as to where government spending can be reduced. These are highly respectable goals. The concern that I have is that Americans will tire of participating through YouCut and that spend-a-holics like Rep. Rush Holt will use waning participation in YouCut to justify their promiscuous spending of the taxpayers money. Fiscally irresponsible members of Congress will be able to argue that since there was no public outcry regarding their earmarks, the electorate essentially supports such programs.

China's Increasing Militancy   China's increasing militancy is having an unintended consequence: Asian nation's are seeking closer relations with the United States. For instance, Japan is extending the length of time that American forces will be allowed to remain at military bases in Japan.

Full post as published by Vertical Pulse on May 26, 2010 (boomark / email).