Obama caps executive pay tied to bailout money

[Tigermike 4,246]

Many progressives (liberals) thought that Pres. Obama had abandoned them after the election, but I’ll bet they’re singing a different tune today:

Obama caps executive pay tied to bailout money

By JIM KUHNHENN, Associated Press Writer Jim Kuhnhenn, Associated Press Writer – Wed Feb 4, 5:45 pm ET

WASHINGTON – President Barack Obama on Wednesday imposed a $500,000 cap on senior executive pay for the most distressed financial institutions receiving taxpayer bailout money and promised new steps to end a system of "executives being rewarded for failure."

Obama announced the unusual 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 pay limit comes amid a national outcry over huge bonuses to executives who head companies that seek 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 amid the economic downturn and the massive infusion of taxpayer dollars.

The limit would apply to top-paid executives at the most distressed financial institutions that are negotiating bailout agreements with the federal government. It also would apply to other banks that receive aid, but they could get around the limits by publicizing to shareholders plans to exceed the salary cap.

(The “most distressed financial institutions” will not include those which have already received TARP funds, such as AIG and Citigroup. However, those firms are already subject to caps on executive pay under the statute authorizing the bailout last Fall. And because these companies have all come to the government “with hat in hand,” in Obama’s words, not too many people outside of Wall Street are upset. Yet, Obama does not seem content to stop with these “distressed” companies) :

The limits would not apply retroactively to any bank that received money from the first half of the $700 bailout allocated by Congress. For example, 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.

But Obama touted the broad symbolism of his action.

"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."

"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.

(Obama’s proposals are somewhat tolerable with respect to the bailed out companies since they are being funded with tax payer dollars. If these companies are going take the money, then they should have to abide by whatever rules are attached to the funding no matter how onerous. But trying to impose such draconian restrictions on companies that are not being bailed out is nothing more than a direct assault on freedom.)

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.

(That is exactly the sort of creeping socialism that many of us were worried about with Obama’s election. Mind you, McCain would not have been much better, but this sort of heavy handed government interventionism would not have been proposed by his administration, much less tolerated by most Republicans in Congress. )

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."

http://news.yahoo.com/s/ap/20090204/ap_on_...t_executive_pay

It’s hard to generate much sympathy for executives who’ve coming begging to Washington. But at the same time, what point is there to heavy handed measures that don’t do anything more than satisfy some people’s (the far left) jealousy and outrage? Shouldn’t these proposals be designed to put people back to work?

[Bottomfeeder 244]

They should have let the free market run it's course and allow the banks to fail, all of them who were doomed to fail. Then there would no issue concerning CEO pay, because those CEOs would be in the unemployment line just like everyone else. There would be no bonuses and the free market could have cleared this up in two years or so. BUT, NOOOOOOooooooooooo. No. They had to go and make it worse than had to be. Fools, like Paulson need to be tar-and-feathered and publicly humiliated. Now, it stands to reason that they'll expect the American public to pay for all of this. I don't think so. There has to be a way to make those who are guilty pay for this, instead of strapping the burden upon the innocent.

I think Paulson broke the law.

[autigeremt 7,543]

I think we are in big, big trouble. I'm worried for our nation.

[OldNewby 27]

I think Paulson and others broke the law. And continue to.

Gimme. Gimme. Hurry. Hurry.

[rexbo 104]

Typical Liberal Democrat. Do as I say, not as I do. He should set the example by cutting out his taxpayer funded 'perks' too then...

Obama's Perks: Private Jet, Chef Tax-Free

[RunInRed 19,639]

TM -- Must be a slow day on the right winger circuit...this is yesterday's news and actually first surfaced on Tuesday afternoon.

Rexbo -- Why were you not b*tching about these "perks" when Bush was in office? They are not any thing new for Obama.

How any one could argue against this new legislation baffles me. Especially since those most likely to do so, were also the same one's b*tching about resort trips, redecorating offices, golden parachutes and large bonuses. So Obama comes out attempting to put an end to all of this and you still b*tch. It's rank partisanship, I get it but man, some of you guys need a breath of fresh air.

[rexbo 104]

Rexbo -- Why were you not b*tching about these "perks" when Bush was in office? They are not any thing new for Obama.

Um, because Bush wasn't imposing socialist price controls on CEO salaries.

The only good thing about this legislation is that the CEO's will think twice before they put their hands out for taxpayer dollars...

[TitanTiger 22,249]

I have no problem with capping executive pay if a firm is failing and taking taxpayer money to stay afloat. To have the average Joe and Jane out there working their butts off to pay taxes and bail these pinheads out, only have them turn around and spend it on multi-million dollar salaries and other perks is the height of arrogance and utter detachment from real life.

And don't give me the "salaries should be determined by the free market" BS either. These guys left the free market the second they put their hands out asking for my money. They work for me now and I don't reward failure.

[MDM4AU 339]

I have no problem with capping executive pay if a firm is failing and taking taxpayer money to stay afloat. To have the average Joe and Jane out there working their butts off to pay taxes and bail these pinheads out, only have them turn around and spend it on multi-million dollar salaries and other perks is the height of arrogance and utter detachment from real life.

And don't give me the "salaries should be determined by the free market" BS either. These guys left the free market the second they put their hands out asking for my money. They work for me now and I don't reward failure.

Couldn't agree more.

[Bottomfeeder 244]

We all reward failure, just look at congressional pay.

[Tigermike 4,246]

TM -- Must be a slow day on the right winger circuit...this is yesterday's news and actually first surfaced on Tuesday afternoon.

Rexbo -- Why were you not b*tching about these "perks" when Bush was in office? They are not any thing new for Obama.

How any one could argue against this new legislation baffles me. Especially since those most likely to do so, were also the same one's b*tching about resort trips, redecorating offices, golden parachutes and large bonuses. So Obama comes out attempting to put an end to all of this and you still b*tch. It's rank partisanship, I get it but man, some of you guys need a breath of fresh air.

If it was yesterday's news why didn't you bring it up? Didn't want to showcase your dearly beloved leaders socialist tendencies and grandstanding?

It's rank partisanship, I get it but man, some of you guys need a breath of fresh air.

Pot meet kettle.

[arnaldoabru 11]

http://www.washingtonpost.com/wp-dyn/conte...68.html?sub=new

[Grumps 3,706]

They should have let the free market run it's course and allow the banks to fail, all of them who were doomed to fail. Then there would no issue concerning CEO pay, because those CEOs would be in the unemployment line just like everyone else. There would be no bonuses and the free market could have cleared this up in two years or so. BUT, NOOOOOOooooooooooo. No. They had to go and make it worse than had to be. Fools, like Paulson need to be tar-and-feathered and publicly humiliated. Now, it stands to reason that they'll expect the American public to pay for all of this. I don't think so. There has to be a way to make those who are guilty pay for this, instead of strapping the burden upon the innocent.

I think Paulson broke the law.

Awesome post, BF. I could not agree more.