The Obama administration is expected to impose a cap of $500,000 for top executives at companies that receive large amounts of bailout money, according to people familiar with the plan.
Executives would also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends.
President Obama and Treasury Secretary Timothy F. Geithner plan to announce the executive compensation plan on Wednesday morning at the White House.
The new rules would be far tougher than any restrictions imposed during the Bush administration, and they could force executives to accept deep reductions in their current pay. They come amid rising public fury about huge pay packages for executives at financial companies being propped up by federal tax dollars.
Good. Naturally, they should be allowed to regain their inflated salaries when they get off the government teat and have paid us back.
I think this really raises a question about the wisdom of the bailouts in the first place.
Whilst it may be a popular (and populist) move to cap executive compensation for these folks there is are several questions that need to be answered.
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1. Given the loads of money that good executives can make in solvent companies, why would any quality executive take on the responsibility of trying to turn these companies around with the proposed level of compensation?
2. Will the government try to extend this to all executives? Should the government control pay scales and even the corporations themselves? Is this not nationalization?
3. When have wage controls ever produced good results?
And, I was against any type of bailout for these companies to begin with.
I would take the job for half a million, personally. I’d bet more than 90% of all americans could take the job. The myth is that executives are somehow irreplaceable.
Although I don’t think this is the best way . A better way is a progressive income tax, not a salary cap. It creates the disincentive for people to feel entitled, and is essentially a tax on greed.
awww, no big fat bonus? boo hoo. if i had done such a lousy job i would have been sacked long ago! i cannot believe these people are still in their positions. imho they should be tarred, feathered and run out of town in shame…or at the very least shackled in the town square for awhile.
Want higher pay, don’t get a gummint handout.
I think that this is an excellent idea for companies that have taken taxpayer money. The executives are capped at half a million dollars except stock options. If they want to make more money, they can. All they have to do is ensure that the value of their company’s stock increases. Imagine that! They get paid more for doing their jobs effectively. They have incentive to succeed. As it stood before, they got greatly rewarded win, lose, or draw. It is finally time for the ubermen to come down from Mt. Olypmus and EARN their rewards rather than just have them handed out without effort. (Or, does it take a lot of effort to bankrupt a company?)
You take Caesar’s coin, you play Caesar’s tune. Of course, these execs might just go elsewhere, leaving their firms in the hands of others who will likely be worse. But that’s not the point, really, the point here is gaining [i]control[/i].
I think some companies are getting the word that the bailout is not going to cover bonuses and other fringe benefits. Example in today’s TV news: When word got out that Wells Fargo was going to treat its company exec’s to a tremendous high cost vacation in Las Vegas, the resulting anger that arose caused the company to cancel the big splurge!!
Wells Fargo was forced by Hank Paulson to take the money, now they’re forced into sackcloth and ashes by David Brooks’ Ward Three moralists. Outrageous. Meanwhile, our new [url=http://thehill.com/leading-the-news/500k-spent-on-dem-caucus-retreats-2009-02-03.html]philosopher-kings[/url] live it up.
Perhaps, this will cool some of these company’s executives’ ardor to acquire a bailout. I don’t think this was the best idea- I’m not in favor of the government telling private individuals how much they can make, but if we must have any bailout at all (and I don’t think we really must) then anything that will slow down the rush to hire lobbyists to get their company’s piece of the bailout pie is a good thing.
As far as a talent drain from sinking companies, I fail to see how others could do worse than the current lot.
Actually, the real reason for this silly legislation is to lure the rubes into a bait and switch. Nothing like a good jolt of class envy to deflect the attention of the rubes away from the looters we elect to represent us in the hallowed halls of Congress. The real villains of this sordid tail are the honorable worthies who gave Wall Street the rules of the game while gobbling up their vast political contributions. If you or I collected or paid money under the circumstances political contributions are solicited and paid we would find ourselves on trial for one side or the other of bribery. But not our Congressmen and Senators. Or their benefactors of all stripes. There is plenty of blame to go around in this mess. Just don’t forget who the real perps are in this sorry affair. We elected each and every one of the SOBs, after all. We should know them for what they really are. Stunts like this are their quite effective way of deflecting the attention of us rubes.
$250,000 would’ve been more like it.
I remember the report on the big banks that were called in to Paulson’s office. They were told to sit down shut up and sign the form authorizing the bail-out terms.
When Wells-Fargo at first refused, saying that they were not in any kind of financial trouble, they were threatened with loss of FDIC status and other things not specified. So they signed, under duress.
POTUS deciding the compensation of CEOs of private companies is not just socialistic or communistic, it is a step toward a dictatorship. This has never happened before in our history. Just because the government loaned these companies money (and the government did insist these were loans, not gifts – and some companies, like Wells Fargo were forced to take the TARP loans) does not mean POTUS has the right to interfere in the inner workings of the company. It’s very politically popular thing to do … everyone (as I see on this blog) loves to see the guy or gal on top brought low. But do you think this government interference will stop here? Doctors get funding from Medicare and Medicaid – how much are they going to be allowed to make? Churches are given tax free status – how much are their pastors, priests, staffs etc going to be allowed to receive, if they have that status. Insurance companies are not subject to anti-trust statutes. How much are they and their executives going to be allowed to make, in order to continue to enjoy that status. Nation-wide businesses use the interstate systems and are governed by the interstate commerce statutes – how much are they going to be allowed to make if they use government supported infrastructures. You may think this is extremist thinking, but I invite you to read many of the histories of how Mao changed the cultural thinking of China before he took over and became its dictator. And one last thing … these CEOs whose income POTUS just slashed to $500,000 … they all, I’m sure, have employment contracts with these companies … so now our POTUS can simply abrogate contracts by the stroke of his pen. Let’s remember that contracts are the lynch pin of our commercial system and are protected by the Constitution. Please think clearly about what our newly elected POTUS is doing here, before you really jump on this bandwagon. It may be a chicken that comes home to roost in your own hen house.
I do find it amusing that the compensation consultants argue that those making half-million are going to undergo severe hardship. And its amusing how these people believe that they are utterly irreplaceable, like demigods. And how we buy into it….
John, while many of them may be independently wealthy and don’t need the income, many also are just like you and me and live up to their income. So, I would suggest you put yourself in their place and think about losing 95% of your income and try to continue to live as you do. While their livestyle may not be hardship in a vaccuum, they will lose substantial amount, if not most of their investments, if there are loans on them. Many may lose most of what they have worked for over a long period of time, even their entire careers. I am not in agreement with such large salaries or bonuses, just based purely on the questions of what someone is worth and what is excess. But I’m also not in favor or what is going on here, where these people are being made to pay for the sins of the entire population, including many of our Congressmen and Senators, and including our own POTUS, who secured much pork for IL and for his wife’s company, while a Senator.
Keep your eye off that ball, people! This bait and switch is going just fine in this group. A little diddling with CEO compensation gets your undivided attention while the Administration sells the snake oil of the BIGGEST GOVERNMENT EXPENDITURE LEGISLATION IN THE HISTORY OF THE WORLD and you don’t seem to notice.
God help America. We are headed to hell in a handbasket!
Let’s say one of these bailed-out firms jettisons a good portion of the executive squad that brought them to the point of pleading for a bailout. Now they need to find a replacement set of executives, no? Let’s say they find a really top-notch CEO…would such a person go to a firm where he can be paid according to his worth, or prefer to settle in at a fraction of the pay at Bankrupt & Bailedout?
Billy, I’m not sympathetic. They’re going to be living off the government, backed by our taxes. Many of them were living off bonuses they gained from offering bad mortgages in the first place. You are generally right: people don’t like to lose wealth.
But you shift the amount to percentages, which is an interesting sleight of hand. The fact is that they have enough to live, and have enough to live well. I don’t see why people should be entitled to a third house in the Hamptons, ski vacations in vail, when they are sucking off the public teat. They can rent, ski in vermont and send their kids to public school. it’s not as if they will be going under much hardship.
But its interesting, isn’t it? We have all this money to help out bankers, and they whine when they lose their vaulted position in society. And yet it seems that the class that adores bankers themselves get resentful when the government helps the least among us.
John, your point in your last paragraph is well put and in many instances valid. My point is not that these people cannot make it and make it well, in a vaccuum. Using percentages is not a sleight of hand. I don’t make anywhere close to $500,000. But if I lost 95% of my income, I would lose most everything I have worked for over 30 years as a lawyer for. Perhaps you would say that’s ok with you, because I might still have enough to rent a small apartment, buy food and drive a very small car. My point is, first, the prinicipal of POTUS voiding contracts and inserting himself in private companies by executive fiat, on the basis of government loan, is bad in the long run for our country and probably unconstitutional. Second, you are viewing their economics in a vaccuum, instead of in a relative term. I’m sure they will all survive handsomely, and hopefully, this measure will make these “bailed out” companies pay the money back sooner than later. But it is bad policy all around and it is not how Jesus would have us respond to those who suffer this degree of loss of income – with dismissive care-lessness. Now as to your last statement, about the resentment for the least among us who are helped … as I said, you point is well taken. But I would caution that such resentment does not necessarily come from the help given, but from the expectation or “entitlement” attitude shown by some of the “least among us,” to use your words, and the lack of effort to take responsibility for oneself exhibited by those who accept government “hand outs.” (Now having said all of that to you, please understand that I am not in favor of any bailout whatsoever. I favor letting the chips fall where they may. It may be painful, but it will be over and rebuilt much quicker and hopefully much stronger. These “stimulus” packages are not stimulating, they are social engineering, and they will make the American people die of 1000 cuts during the recession that these packages will prolong interminably into our children and grandchildren’s working lives.)