Obama To Cap Executive Pay At $500,000 For Bailout Recipients
Written by on Tuesday, February 3rd, 2009 in Latest News.
As reported today, Barack Obama is expected to announce Wednesday a series of new pay limits, including those for executive pay, for companies receiving significant amounts of bailout money. Obama is scheduled to make the announcement alongside Treasury Secretary Tim Geithner at the White House.
While specific details regarding the type of pay limits that the Obama administration plans to set have so far been vague, the New York Times is now reporting that top executives may see their pay capped at $500K:
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 plot.
Executives would also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends. [...]
Crucial details remained unclear on Tuesday night, including whether the restrictions would apply to all companies that receive money under the so-called Troubled Asset Relief Program, or TARP, or whether they would apply only to the “exceptional” companies that were being rescued from collapse.
The Times article has more on which executives could come in for huge pay cuts.
The Wall Street Journal, which also reports the $500,000 figure, has more details on the plans:
The Obama administration also plans to bar chief executives of such firms from receiving severance payments. And it is expected to require that firms receiving taxpayer money give shareholders more say in how top executives are compensated, according to people familiar with the administration’s plans.[...]
The administration’s tighter restrictions won’t apply to any of the existing financial-rescue programs, including Treasury’s $250 billion effort to inject capital into banks. But as the administration prepares to launch the second phase of the financial bailout, it is promising to impose stricter rules for any firms that get taxpayer money.
Speaking on NBC Nightly News Tuesday, Obama repeated his criticism of the industry’s payments, saying: “If the taxpayers are helping you, then you’ve got certain responsibilities to not be living high on the hog.”
More details on what the administration may unveil, from the AP:
Administration officials have said that the new restrictions would apply only to those struggling large firms that receive “exceptional help,” such as the American International Group Inc., Citigroup Inc., and Detroit automakers. They would not apply to healthy banks that receive government infusions of capital.
And Obama’s chief economic adviser, Larry Summers, has proposed that firms that want to pay executives above a certain threshold would have to compensate them with stock that could not be sold or liquidated until they pay back the government funds.
Top officials at companies that have received money from the government’s Troubled Asset Relief Program already face some compensation limits. But elected officials want to place more caps, a sentiment reinforced in recent days by revelations that Wall Street firms paid more than $18 billion in bonuses in the midst of the economic downturn in 2008.
Original post by AFP and software by Elliott Back
