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;
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.