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Since 2008 – Progress Through Politics

Administration to limit executive pay

Tomorrow, President Obama and Treasury Secretary Geithner will implement a pay cap of $500,000 to executives of companies receiving bailout money.

The New York Times reports the plan, which is similar, though not as strict as the plan proposed by Senator Claire McCaskill (D-Missouri) this week, will allow for bonuses, but no large than their pay base. (Whether this means bonuses cannot exceed their base salary or total more than $500,000 plus salary is still in question). McCaskill’s plan banned any bonuses at all.

Here’s the story;

http://www.nytimes.com/2009/02…

WASHINGTON — 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. President Obama and Treasury Secretary Timothy F. Geithner will announce the executive compensation plan on Wednesday at 11 a.m.

Executives would also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends.

The new rules would be far tougher than any restrictions imposed during the Bush administration, and they could force executives in the months ahead to accept deep reductions in their current pay. The proposed cap comes amid rising public fury about huge pay packages for executives at financial companies being propped up by federal tax dollars.

Executives at companies that have already received money from Treasury Department would not have to make any changes. But analysts and administration officials are bracing for a huge wave of new losses, largely because of the deepening recession, and many companies that have already been to the trough may well be coming back.

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.

Under the Treasury’s $700 billion rescue program, most companies that have received money so far have been considered healthy rather than on the brink of collapse.

But five of the biggest companies to get help — Citigroup, Bank of America, American International Group, General Motors and Chrysler — were all facing acute problems. And top executives at those companies made far more than $500,000 in recent years.

Here’s an opinion in opposition;

“That is pretty draconian, $500,000 is not a lot of money, particularly if there is no bonus,” said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

“It would be really tough to get people to staff” companies that are forced to impose these limits, he said. “I don’t think this will work.”

I don’t know about you, but I know more than a few people who are unemployed and willing to work for much less…and are probably more qualified to hold those jobs than ones who hold those jobs now. I’m sure they won’t find a problem trying to find people who will work for $500,000 out there…maybe they will inside their own little selfish greedy corporate bubble, but that’s too damn bad.

My problem with it is that I still oppose bonuses. Do they really need bonuses? It’s become such a joke in the corporate world now…bonuses used to be extra pay for good work, now they’re just expected, like extra salaries. I’m pessimistic that we’d be able to eliminate bonuses anyway…even with McCaskill’s plan.

While it does not as restrictive as McCaskill’s plan, which I strongly favor, it’s a step in the right direction. Even if the cap is $1,000,000, that’s still a hell of a lot less than they’re making now. This probably represents a happy median.

The President likes happy medians.  


Categories: Uncategorized.

/ 17 Comments

17 comments

  1. Chris Blask

    And as hard as it is to say this, $500K a year is not an outrageous salary to run a massive company.  Really good salespeople can make more than $500K.  I know small business owners in janitorial who make not a whole lot less than that.  It’s several quantums less than a good athlete or movie actor makes…

    We don’t want to make these jobs “low” paying in the long term, anyway.  Just bring them down as long as they have to take Gov’t money to pay them, so maybe they’ll be extra incented to get to work.

  2. Michelle

    It may not be a lot of money in the overall bailout plan, but honestly, we don’t need the Richie Richs of the world hoarding anymore money.  I know that they are all bitching right now about losing everything in the market, yadda yadda yadda…but my response to that is the following: You didn’t want to keep paying into a progressive tax structure 8 years ago, so you helped vote in that asshole who gave you what you wanted, i.e. lower overall effective tax rates for the richest, no corporate oversight, and unfettered access to our free market.  You paid a little less in taxes over 7 years, made a shit ton of money in the market, and then you lost it all and a helluva lot more with your unfettered greed.  So shut up and PAY UP.

  3. GrassrootsOrganizer

    I imagine if you took away all the benies, and dropped the pay to under $10 an hour without significant raises, and removed all job security and other union protections, we’d see a pretty high turnover in auto factories.  The guys with 20 years on the job welding together your Chevy would be quickly replaced by a churning pool of inexperienced workers, with no experienced workers left around to teach them their jobs.  Such working conditions would make it harder for companies to recruit and keep skilled factory workers, most of whom would burn out on the job fairly quickly and move on to something else.

    But, um, who cares?

  4. GrassrootsOrganizer

    I wish someone would write a diary on this…

    The whole notion that Obama wants to “redistribute wealth” needs to be combatted with one simple stupid fact — Republicans have aided and encouraged the redistribution of wealth the other way for decades.

    through excessive interest rates and fees to banks and credit card companies, their top executives and investors

    through inflated housing prices to developers and real estate speculators

    through over inflated energy prices to oil executives and stock holders

    through taxes to war profiters

    to all these over paid CEOs through healthcare premiums, suppressed wages and unpaid overtime hours from their workers

    Every freaking time a corporation sells a necessity for excessive profit or suppresses wages in a tight job market they are engaging in the forced “redistribution of wealth” and that practice doesn’t become more American because Rush says it is.  

    Anyone with a brain cell can step back and see why this economy is tanking — the rich have gotten so rich, and the rest of us so strapped, that the system can no longer sustain itself.  I earn above the average wage in America, my credit burden is well below average, and yet the bulk of my income goes to interest, utilities, taxes, food and insurance with little left over to make purchases that grease the economic wheels.  Where is all that money going?  UP THE FOODCHAIN — into the pockets of the ridiculously wealthy.  My “wealth” is being redistributed every GD day.

  5. sricki

    But… **shrug** This is still a step in the right direction — just not as large a step as I’d like to have seen. But maybe that will make the transition easier.

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