Obama caps executive pay tied to bailout money

[Breaking News Breaking News]

By JIM KUHNHENN, Associated Press Writer
5 mins ago
 
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 all institutions that have negotiated agreements with the Treasury Department for "exceptional assistance." Those would include American International Group Inc., Bank of America Corp., and Citigroup Inc.

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 would have more leeway. They also face the $500,000 limit if they're getting government help, 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.

Top officials at companies that have received money from the government's Troubled Asset Relief Program already face some compensation limits.

And compensation experts in the private sector have warned that such an intrusion 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.

"It's not a government takeover," Obama stressed in an interview Tuesday with CNN. "Private enterprise will still be taking place. But people will be accountable and responsible."

Still, some elected officials were pushing for the stricter caps.

Sen. Claire McCaskill, D-Mo., has 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. Her 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/bailout_executive_pay

[BlueMoon]

Obama should score some big points with this one.

Where were all the Congresspeople and Senators when this was voted on initially. (Obama was a Senator then who voted for it). These rules would have been better before the money was approved with no strings..

[Richard]

I think it’s a step in the right direction but pay caps alone won't fill the accountability deficit that has fueled runaway executive compensation and other corporate excesses.

[Breaking News Breaking News]

Obama's executive pay limits have loopholes: report

Fri Feb 6, 2009 3:02pm GMT    

(Reuters) - President Barack Obama's crackdown on Wall Street pay contains loopholes, and may have limited impact in restraining compensation, the Wall Street Journal said, citing executive-pay consultants and management attorneys.

Some compensation professionals are already pointing out potential holes in the rules, including tactics such as changing executives' titles or rearranging pay packages, the paper said.

Obama set a $500,000 annual cap on executive pay and imposed other restrictions on companies that receive money from the Treasury Department's Troubled Asset Relief Program, or TARP.

The Journal said just as past attempts by the government to restrict executive pay largely backfired, the new curbs may also have unintended consequences, citing its sources.

Some critics suggested that the restrictions be retroactively applied to companies that already have received federal bailout cash, the paper said.

The critics noted that the most stringent restrictions likely would affect only a few firms and others could avoid some of the curbs by putting extra pay to a shareholder vote.

Others believe the plan does not limit total compensation because it allows companies to boost awards of restricted stock, the paper said.

The Senate voted on Thursday to ban bonuses for top executives at banks or companies receiving taxpayer money from the Treasury Department's $700 billion bailout fund.

http://uk.reuters.com/article/reutersCom...DQ20090206

[Anu-021413]

Be careful what you ask for. You see since these institutions have taken the money, they are now indebted to the Gov't. To cap one group of people's pay is a slippery slope. It's Gov't control on earnings at the end of the day. I'm not pleased with the exorbitant pay/bonuses as well,but still like it or not, it was never our Gov'ts job to cap and regulate earnings directly. If they have changed the amount that's considered "rich," that can change without notice now and or later. It's open to abuse down the line.

As well I don't trust the math skills of politicians,when Nancy Pelosi says 500 million jobs could be lost,when there's only 300 million people in this country. Unless she's adding in 200 million Illegal immigrants.

[Breaking News Breaking News]

Stimulus bill seeks to recover Wall Street bonuses

By MATTHEW DALY, Associated Press Writer 
2 hrs 55 mins ago
 
WASHINGTON – Financial institutions that received federal bailout money and paid large executive bonuses would be required to compensate taxpayers under the economic stimulus bill approved by the Senate.

The $838 billion measure includes an amendment penalizing companies that paid bonuses greater than $100,000 to executives after receiving government rescue funds last year. The amendment would require the companies to repay within four months any portion of the bonus above $100,000 or face an excise tax of 35 percent on the portion of the bonus above $100,000.

The Senate approved the stimulus bill 61-37 on Tuesday, setting up negotiations with the House, which passed a slightly different version last week.

"It should have gone without saying that the bailout money was never intended for employee bonuses, but once again financial institutions have taken advantage of lax regulation and the public trust," said Sen. Ron Wyden, D-Ore., who co-sponsored the amendment with Sen. Olympia Snowe, R-Maine.

"The American people are demanding that these firms get serious about getting our economy back on track,' Wyden said. "Congress has to show that it is willing to step in until they get the message."

Snowe, one of just three Republicans to back the stimulus bill, said the financial bailout Congress approved last fall "left open an escape hatch of golden parachutes for top executives on Wall Street, the same individuals whose careless mistakes hurt the financial system and forced taxpayers to foot the bill in the first place."

She said that by requiring the companies to return bailout funds used to pay big bonuses, the government could "claw back" bonuses already paid to senior executives at firms that received money in the final quarter of 2008 from the Treasury Department's Troubled Asset Relief Program, known as TARP.

Snowe and Wyden said their amendment would work in conjunction with the Treasury Department's new guidelines on executive pay for financial institutions receiving TARP funds, by applying strict standards to bonuses paid in 2008. The new guidelines, announced Tuesday, apply to the unspent $350 billion installment of the $700 billion bailout fund.

The Joint Committee on Taxation estimates that the Wyden-Snowe amendment would raise as much as $3.2 billion. Financial institutions received more than $274 billion through the bailout program while paying out an estimated $18.4 billion in employee bonuses last year, the committee said.

http://news.yahoo.com/s/ap/20090210/ap_o...vmBH0EtbAF