Earlier this week, President Barack Obama’s administration placed a salary cap of $500,000 on top executives at firms that received bailout money.

This sounds like a great move. These corporations failed and went to the government for a handout, so it seems logical that there should be a limit on the amount of compensation their executives should get. It seems morally wrong for a failed company’s top executives to still receive salaries in the millions of dollars.

It is a move that is tailor-made to satisfy a disgruntled public in these economic times — a public who can’t understand why they’re struggling to hang onto a job while a CEO of a bailed-out corporation can get a new jet.

But it’s the wrong move. And it’s wrong for reasons that don’t have anything to do with “communism” or “socialism.”

The entire purpose of the stimulus package and 2008 bailouts is to fix financial companies and other major industries that are struggling. In order to fix some of these companies, it may be necessary to bring in talented executives from different, more successful, corporations.

However, the existence of this salary cap will significantly reduce the number of competent CEOs who may be willing to take such a risk.

Let’s say that you’re a talented corporate executive and you have the choice between two positions. In position 1, you would be the head of a successful corporation that did not need to take bailout money, and your compensation would be $5 million. In position 2, you would join a rapidly failing corporation that is receiving help from the government and therefore your compensation would only be $500,000.

It’s pretty obvious which choice most people would make. There will also be some talented employees at these companies (yes, there can still be talented workers at failing corporations) who will leave for higher-paying jobs at corporations that aren’t hamstrung by the salary caps.

It’s also a questionable move because it will reduce the number of corporations who may be willing to take bailout money, making any economic progress even slower. Corporations who have already received bailout funds are exempt from the salary cap, which makes the entire plan seem arbitrary.

When the media does its job, the public will know about those companies that are scamming the government system. Then, the public has the free choice to decide not to take their business to that bank or corporation. Just one person refusing to use a bank may not be a lot, but if thousands of those “just one person”’s make the same decision, that company will feel the sting.

Market forces are what will fix this problem. Setting arbitrary salary caps is not the solution.