Obama caps executive pay tied to bailout money

[Equine_Woman]

It's a step in the right direction. . .

http://news.yahoo.com/s/ap/20090204/ap_on_go_pr_wh/bailout_executive_pay

WASHINGTON – President Barack Obama on Wednesday imposed a $500,000 cap on senior executive pay for the most distressed financial institutions receiving taxpayer bailout money and promised new steps to end a system of "executives being rewarded for failure."


Obama announced the unusual 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 pay limit comes amid a national outcry over huge bonuses to executives who head companies that seek 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 amid the economic downturn and the massive infusion of taxpayer dollars.


The limit would apply to top-paid executives at the most distressed financial institutions that are negotiating bailout agreements with the federal government. It also would apply to other banks that receive aid, but they could get around the limits by publicizing to shareholders plans to exceed the salary cap.


The limits would not apply retroactively to any bank that received money from the first half of the $700 bailout allocated by Congress. For example, the restriction would not apply to such firms as American International Group Inc., Bank of America Corp., and Citigroup Inc., that already have received such help.


But Obama touted the broad symbolism of his action.


"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."


"There is a deep sense across the country that those who were not ... responsible for this crisis are bearing a greater burden than those who were," Geithner said.


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 that get capital infusions from the Troubled Asset Relief Program in the future will have more leeway. They also will face the $500,000 limit, 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.



Compensation experts in the private sector have warned that intrusions 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.
"One of the big questions is whether it will make it more difficult to recruit and retain executives at these companies," said Claudia Allen, chair of corporate governance at the Chicago-based law firm of Neal, Gerber & Eisenberg.



The $500,000 cap "is a very tight limit," she said.



Timothy J. Bartl, vice president and general counsel for the Center On Executive Compensation, said the president's actions are a unique situation given the government's role bailing out troubled institutions.



"We do not view it as something that ought to be extended beyond this circumstance," he said.



On Capitol Hill, some lawmakers had been pushing for even stricter caps.



Sen. Claire McCaskill, D-Mo., and Sen. Bernard Sanders, I-Vt., have 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. The 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."

[WashingtonBay]

Well, there's considerable disagreement (of course) on the other thread about whether it's a step in the right direction. ;)

[Equine_Woman]

Ahh, well I figured there would be (disagreement). Missed it. You can erase this one if you'd like, I'll go look it up in the other thread.

[WashingtonBay]

Naw it's OK :) This thread has more "facts". The other thread where we talked about it is I think 11's vent thread.

[Ragnar Danneskjold]

WWHCD?What would Hugo Chavez do?

[JackieB]

I don't know what the disagreement is on the other thread, but if a bank wants to accept the federal money, then there's no reason to complain about the salary cap. If the don't like the cap, then refuse the bailout money.

Also note that the banks can compensate executives beyond the limit with stock, it just can't be cashed in until the federal loans are repaid.

This isn't much different than the big proposals I made when I was working for a major corporation for so many years. I asked for money, they approved the expenditure with lots of requirements, and if the project was successful, I could earn more on the other end.

[WashingtonBay]

Eh... my complaint is that it won't solve anything. Ramius's criticism is probably more fun.

I have bailout fatigue.

They're debating on the floor whether to give people $10,000 incentives to buy new cars. The other day, I heard of a buyback program as part of this stimulus that would pay $4500 to people with SUVs, if they replace them with hybrid cars.

It's a flippin giveaway program, and they want to nickle and dime over executive pay and call THAT an outrage. I resent all of it. I resent that these companies were given money in the first place, how much and what they did with it is just window dressing.

[JackieB]

I resent all of it. I resent that these companies were given money in the first place, how much is just window dressing.

Well that's certainly fair enough. I also wish this wasn't going through, but if it does, I don't care if they want to limit executive pay.

[Ragnar Danneskjold]

I don't know what the disagreement is on the other thread, but if a bank wants to accept the federal money, then there's no reason to complain about the salary cap. If the don't like the cap, then refuse the bailout money.
[...]</p>
Uh... They can't refuse the money. Wells Fargo tried to turn it down. But Congress threatened them with all sorts of fun new sanctions if they refused. It was "an offer they couldn't refuse". (This is most effectively said when you have cottonballs stuffed in your cheeks and you say it very slowly).

[JackieB]

</p>
Uh... They can't refuse the money. Wells Fargo tried to turn it down. But Congress threatened them with all sorts of fun new sanctions if they refused. It was "an offer they couldn't refuse". (This is most effectively said when you have cottonballs stuffed in your cheeks and you say it very slowly).

Yes, I did hear something like that. What I recall reading was that Citi tried to back out of the Merrill Lynch deal and got strong-armed into it. So you do have a good point there.

It does all point to the danger of the government getting involved in trying to save private institutions. I am not comfortable with that.

I heard a politician on C-SPAN say tonight that the stock market didn't get back to its 1929 pre-crash level until 1954! And his point was what you have been saying, which is that the government spending prolonged the Depression.

He made a very compelling point that if the federal government is offering jobs that people will take those over private sector jobs (because they are secure with benefits) and deplete the pool of good workers, thereby discouraging private investment. In fact, he said that some of the entrepeneurs themselves would be sidelined because they would go for the security of government jobs. That all makes sense to me.

[twofingers]

while this sounds good, to me it is a back door of gvt control. based on this concept any business that accepts govt money must also accept these guide lines. say boing gets a govt contract, suddenly the folks running it must also limit their monetary compensation. Micro soft does business with the government. google. IBM, and conversely the head of say move-on dot org. can now get half a million for his efforts. let say I get a govt. contract to take care of a few mustangs; govt says I can get 500,00.00 therefore that is my entitlement, pay me! I give most of my art away, I sold a piece (which took over 60 hours to complete) to a 10 year old for 5.00 I sold another piece (which took about an hour and a half to complete) for 3500.00 which price is fair. you should pay attention to what is not being said as much as what is being said. the government has no business telling me or anyone else how much they can earn in the private sector. :worthless:

[HoustonFarrier]

It's a step in the right direction. . .

Until that direction directly affects YOUR paycheck......:)

Be careful what you wish for. There is something called "laws of unintended consequences", that has a way of biting one in the behind when least expected.

Steve

[Remali]

Ageed Equine_Woman, it is a step in the right direction.

Steve, I don't think I will have to worry any time soon that I may be making that kind of money and have a cap on my income....lol. I am far from a senior exec making megabucks!

[HoustonFarrier]

Steve, I don't think I will have to worry any time soon that I may be making that kind of money and have a cap on my income....lol. I am far from a senior exec making megabucks!

What makes you think that the "ceiling" for limits isn't going to come down ????? Right now it's for execs......if this sham succeeeds, and the govt siezes more power, just watch what happens.......

Steve

[Remali]

Well I am just discussing the execs and the current situation.... I'm not worrying about the "what - if's" right now because I really don't think it is going to affect the "little guy" like me.

[HoustonFarrier]

I'm not worrying about the "what - if's" right now because I really don't think it is going to affect the "little guy" like me.

Ok..good luck !:)

Steve

[Ragnar Danneskjold]

Ageed Equine_Woman, it is a step in the right direction.

Steve, I don't think I will have to worry any time soon that I may be making that kind of money and have a cap on my income....lol. I am far from a senior exec making megabucks!

It's easy to get people to agree to things that only affect "the other guy". Kings have long known this.

[Ragnar Danneskjold]

while this sounds good, to me it is a back door of gvt control. [...]

Back door? This isn't sneaking in the back door... this is kicking in the front door, tossing flash-bangs, and rushing into the room! :)

[Remali]

whatever..... you are missing my point but I'm not wasting my time with you any more....I find you to be too one-sided and argumentive and abrasive. It would be nice to have a debate without feeling put-down.

[Ragnar Danneskjold]

whatever..... you are missing my point but I'm not wasting my time with you any more....I find you to be too one-sided and argumentive and abrasive. It would be nice to have a debate without feeling put-down.

I'm sorry. I don't mean to do that.

[WashingtonBay]

I'd call for a group hug, but I'm not sure Remali would want to be outnumbered on that too, smooshed between an old coastie, a farrier and a cowboy. :D

[JackieB]

I'm sorry. I don't mean to do that.

It's true, Remali. Ramius doesn't mean to belittle anyone. At first, I was a little skeptical arguing with him, but he's a good egg. No way does he want you to feel put down. I'm sure of it.

Now go right back in there and kick him in the shins. I'll back you up. :)

[Sundays Man]

It's true, Remali. Ramius doesn't mean to belittle anyone. At first, I was a little skeptical arguing with him, but he's a good egg. No way does he want you to feel put down. I'm sure of it.

Now go right back in there and kick him in the shins. I'll back you up. :)

ALLLLL RIIGHT!!! You Chiren play purdy now!:):nono:

IMHO, the greedy guys at the top of the corps. ran the companies in the ditch. It was a little thing called greed and power hunger. In times past that would have been too bad, so sad; good luck in your next venture. No one would have been sad to see them go. Let the companies that do it right stay in business and grow. I know it's a widespread problem in this country, but we have to learn our lessons and suffer the consequences or nothing will change. Correction, things are changing but not the way we want them to and time will bring that fact out. The politicians are gaining more and more power when they should be out on their butts just like the execs. we are talking about. When the govt. gets it's hands and control on anything it's done for.

We are headed to being a mediocre society governed by and bowing to the demands of power hungry, elitist political loons. That's because the govt. will have their hands and control on every aspect of our lives and they're doing it with our money.

There was a news segment this morning about how the politicians (and all of us) are infuriated by the lavish spending by some of the corporations even after taking govt. handouts. However, at the same time the politicians are screaming about that, they are doing the same thing. Spending millions of tax dollars on retreats, vacations, etc. etc and taking the entire family. Where the heck is my vacation money?!!!! It's a circus I tell ya.

[John Boy]

I'm alittle late on this warfare. ;)

Well I am glad to see exec's get punched , and quite frankly I had worked for a co. that had a CEO who was making 1.5 mill and that was 16 years ago.

I go o.k. he is the guy that chat's about the millions to where this and that goes. What do the other '14 VP's' do ??

I' m rambling , but the point is since when do those disicions that affect companys garner million dollar annual incomes ??
My current co. has about a billion in assets and the CEO makes around 400-500K.

----------
All this leads to is I'd rather have my dollar worth something than to not have the goverment do nothing and I can then use that dollar to whip my ass.
** doesn't it seem like the goverment is quite active right now , while uhmmm the last 8 years I didn't hear a darn thing from them or some of the posters on these forums. :cowboy:

[John Boy]

Ramius - I am more than willing to go toe to toe with you .. . you can find out if I'm your JR. or Sr to one liners :hysterical:

[missdixie]

I think it definitely sounds like a step in the right direction ( but I probably didn't have to tell you guys that ). I do also agree with some of the others that to some degree government needs to back off and let the economy heal itself. I remember doing quite a bit of readin and research in one of my Polisci classes about how the benefit of FDR's Alphabet Soup programs is being debated, and some experts are even blaming his "help" for prolonging the effects of the depression. I am so against all this bailout crap, but if it's going to happen, better impose strict limitations like these. Whoa, am I sounding like a conservative here? I am very supportive of President Obama, but that doesn't mean I can't be open minded and think in a broader sense too. One added note: I do appreciate Equine Woman making a positive thread for once on this board. All it has been for the last few months is nothing but negativity and "vents"- directed towards BO or some other democratic entity at least 3/4 of the time. It gets exhausting, and while I think you all have the right to voice your opinions just like I do, it's hard not to feel like a pack of rabid wolves descend upon us democrats everytime we say a liberal word. It seems like the openmindedness and willingness to really discuss things has dwindled on this board. Just thought I'd post my own "mini vent" since the vents seem to be so popular lately.....

[WashingtonBay]

MissDixie... you have the option of posting any thread you like as well ;) A forum is always begging for good content for consideration and discussion.

Might even feel better than just venting. :)

[missdixie]

Thanks WB, the point is moreso that even a positive thread seems to get ugly somehow.

[Remali]

Alrighty then....no harm done, I do understand now. :) Let the discussions continue.....! lol.
Lemme at them shins....ha ha....

[WashingtonBay]

Missdixie... you saw the poll you ran... You're not as outnumbered as you think. It just may be that the right wing seems more interested in the debate sometimes these days.

It's easier to argue against something than it is to champion for it. I'll grant you that. But it's the ebb and flow of politics. It was that the right had to defend the actions and policies of the president while you had it easy, and now the roles are reversed. This is the chance you guys wanted, to run things! But you'll have to convince us. Thus is the ebb and flow of democracy... :)

It hasn't gotten ugly yet. You want to see ugly, look at political sites with no standard of fair play or restrictions on bad language.... like DU. :) We're tame. Honest! And I hope we always stay that way.

[Ragnar Danneskjold]

It hasn't gotten ugly yet. [...]

What's truly ugly is what's happening in DC. Those bozos are in full-on panic mode and they have no idea at all about what they are doing. They honestly don't know what to do.

If nothing else they should be showing leadership. Calm, deliberate, decisive leadership. Talk UP the economy. Talk about the strengths of the country. There are many. Most companies-- the vast majority-- are making profits. The vast majority (93%)of people STILL have jobs. Talk about RECOVERY, because that's what this should be about.

If any action is taken, take it in small precise movements. Target something specific and show what's going to happen with that thing. Then move on to the next thing. Keep showing the good things. Show how it is done. Inspire confidence. It is not to say they should ignore bad news, of course not, but they shouldn't obsess on it either.

But right now, on TV and everywhere, Congress and the President are obsessed with fear. Cultivating fear. They are using fear and threats of doom to do things they've already admitted they don't understand. They have no idea what to do, so they're doing everything all at once. Like children at the controls of an airplane just pushing their hands across all the switches hoping that one of them will work.

I feel like I'm in a David Zucker movie. He'd call it:

Economy! The Movie!

The same trailer would, curiously enough, still work perfectly:

YouTube - Airplane thriller!

We not only need somebody that can fly this plane, but who didn't have fish for dinner.

[WashingtonBay]

You're right. The last thing the economy needs is a lot of panic about the economy. Mood matters, message matters. "No need to panic, I have everything under control..." only works if it looks like you do!

The last thing we need is Obama sitting up there saying "Well, it looks like I picked a bad week to give up amphetamines..."

Though it would be pretty funny :D

[John Boy]

Miss dixie - I thought about some of these posters and have determined it would not matter who or what party is in the white house , because some people are totally against the goverment even though they won't admit it.
I see no side taking after viewing several discussions as well as posts.

Ramius - I actually believe since Barack has taken over, he is moving slowly with caution.
But your ears hearing the fear tone of voice and comments are actually the goverment realizing the potential for a total collapse.
If they can see it , it means IT COULD HAPPEN.
7% of unemployment (that's people that want jobs and people that don't even look to support themselves but feed off us)
And it's increasing projections by the end of the year at 10%.
1-10 people out of work , and the majority of them are men. So the woman are the baby makers as well as bread winners.
I believe something could of been far sooner - and I'll leave it at that.

[Tiz]

"Ramius - I actually believe since Barack has taken over, he is moving slowly with caution." John Boy

My gosh, this 600 plus page spending spree has been repeatedly hurried along by President Obama. He wanted to have something to sign on Inauguration Day! That didn't pan out, and the date was moved to 2/16. All the while using terms like crisis, disaster, catastrophe, recession with no end, armageddon to describe what would happen to the economy if anyone took the time to read this bill. With some economic indicators looking a bit better, why the rush? The hard sell, buy now or lose the deal of a lifetime, tactics that are being used to push this load, should be a huge red flag to everyone. Fortunately, only 37% of Americans still find this bill acceptable, and that small number is dwindling by the day.

missdixie, remali, equinewoman, what the heck? If people don't agree with you, that doesn't mean they're negative, rabid, closeminded, abrasive, argumentative, prone to repeated venting, and unwilling to discuss things. At least, not where I come from.

[Ragnar Danneskjold]

[...]
Ramius - I actually believe since Barack has taken over, he is moving slowly with caution.


Believe what you wish. But to think that anything happening lately is being done "with caution" is... huh? Do you own a TV?

(I mean that in a nice way.):)


But your ears hearing the fear tone of voice and comments are actually the goverment realizing the potential for a total collapse.
If they can see it , it means IT COULD HAPPEN.

Then it is working.

[twofingers]

I don't know why 7% is such a bad number look at how many presidents came in with 10% or higher Reagan did, he cut tax's and government and got it down in no time. and of course Roosevelt who built government and got it down to,,,,oh wait