08/30/2009 05:12 am ET Updated May 25, 2011

Obama's Victory? Give Me a Break

If this is a victory, I sure don't know what a defeat would look like.

A July 29th New York Times headline states, "In victory for Obama, House panel approves Restraints on Executive Pay." First, you should note that an approval by a panel and a token will buy you a ride on the subway. By itself, it is not worth much. The House has to approve it, and -- given the lobbies lined up -- it may not. More fatally for the bill, the Senate is quite unlikely to support such an anti-Wall Street move.

Wait, wait, I am just warming up. The bill does not limit any one's pay by one penny. It merely allows shareholders to vote on the matter. If and when they do -- the vote is not binding! That is, the corporations are free to pay their executives all they want, anyhow.

You may say the corporations will be embarrassed to pay through the nose after their shareholders vote not to grant monumental pay raises. However, so far there have been no signs, no hints, that these Wall Street firms are embarrassed by anything.

Finally, you should know that unless limits are set on the total compensation of executives, all such a bill -- if enacted, if acted upon, if heeded -- will lead to is just more gaming.

Here is one method of gaming that should give you a feel for all the others. I was a guest of a CEO of a very large insurance company. He even gave me a ride on his private jet. I asked him how much he spent last year on the entertainment of customers, fellow workers, and politicians. He responded with a wide smile: "About 300 dollars." When he saw that my jaw dropped down about as low as it goes, he added with a chuckle: "One of my assistants makes all the arrangements and signs on the checks and credit card slips with his name."

The fact that the CEO felt free to tell me all this shows you how impressed he and his friends are by Obama's "victory."

Amitai Etzioni is a University Professor at The George Washington University, and the author of The Moral Dimension: Toward a New Economics. He can be reached at