Larvatus Prodeo

There’s been a lot of discussion in the wake of the GFC of imposing some sort of cap or limitation on executive and board remuneration. The basic idea – which was accepted by the G8 – goes to a real issue – the perverse incentives to short term-ism which impact on the management and performance of public companies (and particularly, in the current context, banks and other entities in the financial sector). The fact that there’s a bit of a populist angle is a bonus for pollies.

Whether or not what emerges is something of a regulatory dog’s breakfast is probably an easy question to answer, if you treat it as a rhetorical question, but not one of those Kevin Rudd style ones.

In today’s Crikey, Bernard Keane looks at an alternative – a super tax on high incomes – say 50c in the dollar for every dollar earned over a million.

It’s intriguing to contemplate the arguments that might be made against such a proposal. It’s much simpler and neater – and fairer than complex regulatory instruments would be. It doesn’t “distort incentives” between different professions, or different types of firms. It ought to be something that free marketeers and anti-regulation types prefer to capping salaries.

Of course, they probably won’t accept that. It smacks too much of old-fashioned social democracy, in that it restores a greater degree of progressivism to the taxation of income. For that very reason, it’s also unlikely to be taken up by Kevin Rudd. I imagine we’ll see some fiendishly complex regulation instead. That’s the thing about Ruddesque anti-neo-liberalism. Its opposite isn’t really social democracy but rather managerialist policy wonkery.