Pay Czar Kenneth Feinberg to slash executive compensation; is action ethical — or constitutional?

Recently, “Pay Czar” Kenneth Feinberg slashed compensation for executives at seven large financial firms (all TARP recipients) by an average of 50 percent — and he’s not backing down. That move has set off heated argument over economic theory. Lost in the shuffle is a more basic question: Is Feinberg’s action constitutional?

Because he is not a properly appointed officer of the United States, Feinberg’s executive compensation decisions were unconstitutional, argues Michael McConnell, director of Stanford University Law School’s Constitutional Law Center. “The power to set compensation at large American businesses is especially subject to potential abuse, favoritism, arbitrariness, or political manipulation,” he adds.

Is it constitutional or ethical for a government pay czar to control the amount of compensation for TARP recipients without — here’s the key — having been confirmed by the Senate? Does the government have the right to set compensation standards for banks in general?


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