Home > Uncategorized > Want to fix Congress? Let’s institute pay for performance – The Term Sheet: Fortune’s deals blog Term Sheet

Want to fix Congress? Let’s institute pay for performance – The Term Sheet: Fortune’s deals blog Term Sheet

November 7, 2012 Leave a comment Go to comments

It’s helped make corporate America run better.  It might just be the ticket to get our lawmakers back on track.

By Sheila Bair, contributor

FORTUNE — Will the elections bring about improvements in our increasingly dysfunctional government? I fear not. Successfully running for office these days is more about political fundraising and negative campaigning than about the art of governing. Only one in 10 Americans thinks Congress is doing a good job, and no wonder. Our economy is stuck in low gear, and our fiscal situation is precarious. How do we motivate our national leaders to deal with these problems? As with most organizations, it comes down to economic incentives. If our elected officials can keep their paychecks by being adept at fundraising and negative campaigning, then that is what they’ll do. But if at least part of their pay is based on performance, maybe we could get them to focus on doing their jobs. Pay for performance has improved management in the private sector. Why not try it with the folks in D.C.?

MORE: The challenge for the new Congress – save our skin

For instance, one-half of compensation for corporate directors is frequently paid in stock, which they must hold for several years. The idea is to align their economic incentives with the long-term profitability of the corporation. There is no stock ownership in the federal government, obviously, but we do issue a lot of debt (boy, do we ever). So here is an idea: Let’s start paying members of Congress and the President half of their compensation in 10-year Treasury debt, which they must hold until maturity. Members of Congress make roughly $180,000, so under this proposal, they would get $90,000 in cash and $90,000 in 10-year Treasuries. (We would add a housing allowance, too, given the high cost of living in Washington.) For the President, it would be $200,000 cash and $200,000 in T-bonds. If the economy does well and if they get our fiscal house in order and institute pro-growth tax and spending policies, those 10-year bonds should hold their value. But if we continue our profligate ways, inflation spikes, and interest rates skyrocket, those bonds may end up being worth as much as the stuff Czar Nicholas issued shortly before the Bolshevik revolution (some of which I bought at a flea market and now use as wallpaper in the bathroom).

via Want to fix Congress? Let’s institute pay for performance – The Term Sheet: Fortune’s deals blog Term Sheet.

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