Gates, who retired in 2008 to concentrate on charitable work for the Bill & Melinda Gates Foundation, spoke at the 92nd Street Y in New York.
He said, “It’s a tough problem to solve.”
“The cap on salaries turned out to be one of the greatest causes to increase compensation,” Gates said. Gates was ranked as the 10th most powerful person in the world by Forges magazine on Wednesday.
High bonuses tough nut to crack
The U.S. government has so far spent billions of dollars during the credit crunch to bail out top companies like Bank of America Corp, Citigroup Inc and AIG.
Recently, an imposition of $500,000 limit was put on top executives’ salaries, in case of firms that accepted government aid. In Gates opinion, such a measure was counterproductive.
"It was a bad milestone in controlling executive salaries when that $1 million cap went on,” said the $50 billion holder.
"The compensation problem is a very interesting problem. I do think compensation is often too high, but it's a very tough problem to solve," he further said.
Government’s ownership of AIG worrisome
He also said that the government’s ownership of AIG worries him.
"I do worry that when the government owns an entity like AIG that you can greatly devalue that entity by having it essentially have to behave as though it part of the government," Gates said.
"What happened was a surprise to people and it comes from everybody being so optimistic and over ebullient and having a view of risk and price appreciation that was completely out of kilter," he said.
"It's an unnatural situation when the government owns a lot of a private company. Unfortunately there is a view that that should exist for a long term. There's some devaluation of what that asset would have been worth if it hadn't had to go through that kind of management structure. It's unavoidable," Gates said.
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