Obama caps executive pay tied to bailout money

[ycartrob]

Dig it. Maybe this is a way to help these greedy people act more responsibly with someone else's money. I sure didn't get a pay raise 5 years ago when I was in debt with Citibank.

WASHINGTON – President Barack Obama on Wednesday imposed $500,000 caps on senior executive pay for the most distressed financial institutions receiving federal bailout money, saying Americans are upset with "executives being rewarded for failure."

Obama announced the dramatic new government intervention into corporate America at the White House, with Treasury Secretary Timothy Geithner at his side. The president said the executive-pay limits are a first step, to be followed by the unveiling next week of a sweeping new framework for spending what remains of the $700 billion financial industry bailout that Congress created last year.

The executive-pay move comes amid a national outcry over huge bonuses to executives heading companies seeking taxpayer dollars to remain afloat. The demand for limits was reinforced by revelations that Wall Street firms paid more than $18 billion in bonuses in 2008 even amid the economic downturn and the massive infusion of taxpayer dollars.

"This is America. We don't disparage wealth. We don't begrudge anybody for achieving success," Obama said. "But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers."

The pay cap would apply to institutions that negotiate agreements with the Treasury Department for "exceptional assistance" in the future. The restriction would not apply to such firms as American International Group Inc., Bank of America Corp., and Citigroup Inc., that already have received such help.

"There is a deep sense across the country that those who were not ... responsible for this crisis are bearing a greater burden than those who were," Geithner said.

Firms that want to pay executives above the $500,000 threshold would have to use stock that could not be sold or liquidated until they pay back the government funds.

Generally healthy institutions that get capital infusions from the Troubled Asset Relief Program in the future will have more leeway. They also will face the $500,000 limit, but the cap can be waived with full public disclosure and a nonbinding shareholder vote.

Obama said that massive severance packages for executives who leave failing firms are also going to be eliminated. "We're taking the air out of golden parachutes," he said.

Other new requirements on "exceptional assistance" will include:

_The expansion to 20, from five, the number of executives who would face reduced bonuses and incentives if they are found to have knowingly provided inaccurate information related to company financial statements or performance measurements.

_An increase in the ban on golden parachutes from a firm's top five senior executives to its top 10. The next 25 would be prohibited from golden parachutes that exceed one year's compensation.

_A requirement that boards of directors adopt policies on spending such as corporate jets, renovations and entertainment.

The administration also will propose long-term compensation restrictions even for companies that don't receive government assistance, Obama said.

Those proposals include:

• Requiring top executives at financial institutions to hold stock for several years before they can cash out.

• Requiring nonbinding "say on pay" resolutions — that is, giving shareholders more say on executive compensation.

• A Treasury-sponsored conference on a long-term overhaul of executive compensation.

Compensation experts in the private sector have warned that intrusions into the internal decisions of financial institutions could discourage participation in the rescue program and slow down the financial sector's recovery. They also argue that it could set a precedent for government regulation that undermines performance-based pay.

"One of the big questions is whether it will make it more difficult to recruit and retain executives at these companies," said Claudia Allen, chair of corporate governance at the Chicago-based law firm of Neal, Gerber & Eisenberg.

The $500,000 cap "is a very tight limit," she said.

Timothy J. Bartl, vice president and general counsel for the Center On Executive Compensation, said the president's actions are a unique situation given the government's role bailing out troubled institutions.

"We do not view it as something that ought to be extended beyond this circumstance," he said.

On Capitol Hill, some lawmakers had been pushing for even stricter caps.

Sen. Claire McCaskill, D-Mo., and Sen. Bernard Sanders, I-Vt., have proposed that no employee of an institution that receives money under the $700 billion federal bailout can receive more than $400,000 in total compensation until it pays the money back. The figure is equivalent to the salary of the president of the United States.

Even some Republicans, angered by company decisions to pay bonuses and buy airplanes while receiving government help, have few qualms about restrictions.

"In ordinary situations where the taxpayers' money is not involved, we shouldn't set executive pay," said Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee.

"But where you've got federal money involved, taxpayers' money involved, TARP money involved, and the way they have spent it, with no accountability, is getting close to being criminal."

[capt. scotty]

Bout time

Now they just need to set some sort of cap for all corporations and such.

[ycartrob]

Bout time

Now they just need to set some sort of cap for all corporations and such.

You don't want to start putting caps on corporations just b/c they make a lot of money. The free market is what it is, and I think it's a good thing. Government bail out money is a different thing and there should be strict regulation for those corporations who are knowingly misspending tax payer money.

[Angry Ewok]

Bout time

Now they just need to set some sort of cap for all corporations and such.

Insanity.

[primushead]

I'm all for them getting bonuses if all is going well (i.e. if their company is making a profit, jobs are being created and kept, and things are generally peachy).

But nothing burns me up more than hearing that the head of a company that has fucked up royally still gets a $2,000,000 bonus at the end of the year.  It's bullshit.

And I'm glad we have a President that is actually doing something about it.  

[Crispy]

Communist!
(just wanted to be the first)

How will the poor dears possibly be able to survive on a measly half a million a year? This has been a long time coming, but in the future, it will be up to shareholders to stop this nonsensical cycle of paying executives more and more money just to stick around and cut jobs. Any public business that commits mass layoffs and loses money should not be allowed to continually overpay management. And the only way to do that when the "crisis" is over is with consumer power.

[Angry Ewok]

Oh, and I want the government to take more control over the corporations that are accepting federal money... maybe when these companies see the government is beginning to call the shots, they'll be less inclined to take the handout in the first place.

[capt. scotty]

Bout time

Now they just need to set some sort of cap for all corporations and such.

You don't want to start putting caps on corporations just b/c they make a lot of money. The free market is what it is, and I think it's a good thing. Government bail out money is a different thing and there should be strict regulation for those corporations who are knowingly misspending tax payer money.

When I say cap, I mean some sort of percentage of the company's profit, or a number like say, 10$ million for the biggest corporations. I understand capitalism and all that, but there is absolutely no need for someone to make more than 10$ million per year

[Crispy]

Bout time

Now they just need to set some sort of cap for all corporations and such.

You don't want to start putting caps on corporations just b/c they make a lot of money. The free market is what it is, and I think it's a good thing. Government bail out money is a different thing and there should be strict regulation for those corporations who are knowingly misspending tax payer money.

When I say cap, I mean some sort of percentage of the company's profit, or a number like say, 10$ million for the biggest corporations. I understand capitalism and all that, but there is absolutely no need for someone to make more than 10$ million per year

Oh, you say that now, but wait until you get your Boeing Business Jet to carry just your oneself around the world! The upkeep on those things is ridiculous!

[ycartrob]

there is absolutely no need for someone to make more than 10$ million per year

If you can get this guy to understand that, then I'm on board. But in the meantime...

[capt. scotty]

there is absolutely no need for someone to make more than 10$ million per year

If you can get this guy to understand that, then I'm on board. But in the meantime...

Sports are a whole other animal

[goose]

Let's start with the idiots in the fortune 500, and then we'll get to sports.

[mjkoehler]

I applaude this. I work for a company where the CEO's (yes plural)make multi millions a year (upwards of $30-40 million). Seriously, what the fuck do you need with that much money for? Why not give it to the employees. You know, the people who DO THE FUCKING WORK.

Sorry, I'm pissed off and hate Corporate America for just this shit. While 99% of the employees worry if they will have enough to make ends meet and how they are going to pay for rising medical expenses, college for kids, etc., yet Execs make obfuckingsene amounts to basically schmooze with other CEO's.

$500,000 not enough? Where the fuck is all the millions you've been making before? 500K is almost 9 x what I make. Fucking greedy pigs.

[Janet]

While I applaud that Obama did it -  but I'm pissed he had to.

I work in the financial sector - for a privately held company that is not eligible for TARP funds - and the decision was made in 2007 (when the credit markets started tanking) not to cap bonuses but not to pay them at all to senior management until market conditions improve.

   

[Ghosts_on_TV]

Senior Management at my company all just took 10% pay cuts for the forseeable future just so they didn't have to lay anyone off (They have never laid anyone off, ever). I applaud that.

[tomEisenbraun]

Senior Management at my company all just took 10% pay cuts for the forseeable future just so they didn't have to lay anyone off (They have never laid anyone off, ever). I applaud that.

That is highly respectable.

Borders just cut a shitload of hours this week and I'm starting to get a little more worried about getting by while trying to hurriedly pay off this guitar I put on layaway in January. Unless things improve by August, there's no way in hell I'll be able to pay bills with this job or become full time.

[mjkoehler]

Senior Management at my company all just took 10% pay cuts for the forseeable future just so they didn't have to lay anyone off (They have never laid anyone off, ever). I applaud that.

Thats a good start. I have never, ever understood why the few on top need THAT much. Sure make more then then rest as reward for clawing your way there, but come on, that much? Seriously, what the hell are you gonna do with all of it?

[Ruckus]

Senior Management at my company all just took 10% pay cuts for the forseeable future just so they didn't have to lay anyone off (They have never laid anyone off, ever). I applaud that.

Thats a good start. I have never, ever understood why the few on top need THAT much. Sure make more then then rest as reward for clawing your way there, but come on, that much? Seriously, what the hell are you gonna do with all of it?

When it comes to CEO compensation, it really is a intriguing, mostly American phenomenon when examining income disparity in the corporate hierarchy but I had heard that it was changing and many European corps were beginning to follow the American model to "lure the top talent."  ::)

Let us not confuse financial sector heads with general corporate heads although they obviously are seriously intertwined in where the money goes.  Wall Street honchos always made big bonuses whereas the average CEO's compensation packages get even more inflated by generous stock option packages which I'm guessing aren't doing so well these days.  These Wall Street nut jobs should just go suck it. >:(

Not that I'm going to try to read the stimulus bill which I am sure is in the many many many thousands of pages range but I am curious as to the legal loopholes they had to jump through to avoid major constitutionality issues of capping any pay.  I'm sure some story will come in due time and no one has the balls to complain of such a popular move. :)

I guess stuff is starting to happen...

[Penny Lane]

Senior Management at my company all just took 10% pay cuts for the forseeable future just so they didn't have to lay anyone off (They have never laid anyone off, ever). I applaud that.

Thats a good start. I have never, ever understood why the few on top need THAT much. Sure make more then then rest as reward for clawing your way there, but come on, that much? Seriously, what the hell are you gonna do with all of it?

When it comes to CEO compensation, it really is a intriguing, mostly American phenomenon when examining income disparity in the corporate hierarchy but I had heard that it was changing and many European corps were beginning to follow the American model to "lure the top talent."  ::)

Let us not confuse financial sector heads with general corporate heads although they obviously are seriously intertwined in where the money goes.  Wall Street honchos always made big bonuses whereas the average CEO's compensation packages get even more inflated by generous stock option packages which I'm guessing aren't doing so well these days.  These Wall Street nut jobs should just go suck it. >:(

Not that I'm going to try to read the stimulus bill which I am sure is in the many many many thousands of pages range but I am curious as to the legal loopholes they had to jump through to avoid major constitutionality issues of capping any pay.  I'm sure some story will come in due time and no one has the balls to complain of such a popular move. :)

I guess stuff is starting to happen...

i don't see too many constitutional issues as far as capping the pay, which are you thinking? I would consider these companies public sector at this point. I think a lot of the complaints stem from the caps not being in the initial agreements.

I agree about the fear that great execs will be heading overseas but I'm not sure the euro companies are booming either (germany i guess the exception?? not sure)

[mjkoehler]

Senior Management at my company all just took 10% pay cuts for the forseeable future just so they didn't have to lay anyone off (They have never laid anyone off, ever). I applaud that.

Thats a good start. I have never, ever understood why the few on top need THAT much. Sure make more then then rest as reward for clawing your way there, but come on, that much? Seriously, what the hell are you gonna do with all of it?

When it comes to CEO compensation, it really is a intriguing, mostly American phenomenon when examining income disparity in the corporate hierarchy but I had heard that it was changing and many European corps were beginning to follow the American model to "lure the top talent."  ::)

Let us not confuse financial sector heads with general corporate heads although they obviously are seriously intertwined in where the money goes.  Wall Street honchos always made big bonuses whereas the average CEO's compensation packages get even more inflated by generous stock option packages which I'm guessing aren't doing so well these days.  These Wall Street nut jobs should just go suck it. >:(

Not that I'm going to try to read the stimulus bill which I am sure is in the many many many thousands of pages range but I am curious as to the legal loopholes they had to jump through to avoid major constitutionality issues of capping any pay.  I'm sure some story will come in due time and no one has the balls to complain of such a popular move. :)

I guess stuff is starting to happen...

i don't see too many constitutional issues as far as capping the pay, which are you thinking? I would consider these companies public sector at this point. I think a lot of the complaints stem from the caps not being in the initial agreements.

I agree about the fear that great execs will be heading overseas but I'm not sure the euro companies are booming either (germany i guess the exception?? not sure)

I was wondering if this was an American problem or a worldwide issue. Many non financial CEO's still make obscene amounts. Their are some good ones out there who make more then their average employee but not millions and millions more. Sadly not enough.