Has Government Crossed the Line?

From bank bailouts to auto bailouts to executive pay, business is increasingly nervous about the heavy hand of the Obama Administration.

Not so long ago, business and policymakers alike were calling for Uncle Sam to step in and stop the bleeding. Now, the grousing is shifting to arguments that the government is overstepping that subjective line between helpful intervention and harmful meddling, including in areas where business only recently welcomed Uncle Sam’s dollars.

Last week brought plenty of revelations about the government’s role as an activist investor, both now and at the height of the crisis. The Treasury unveiled broad principles for executive compensation and backed legislation to give the Securities & Exchange Commission and shareholders more say in how compensation policy is shaped; it also appointed a « pay czar » to police compensation at the seven companies that have received repeated federal aid.

The Administration’s approach has real dangers. Attempting to reorganize and tinker with the culture of a giant corporation like GM is risky. Taxpayers may find themselves hopelessly entangled in lost corporate causes, with billions of loans never returned. Companies that are shackled with pay restrictions may lose top talent to those that aren’t. Countless historical examples show the potential for unintended consequences from well-intended policies.