Obama Announces Symbolic Cap On Executive Pay
President Obama and Treasury Secretary Tim Geithner moments ago announced a largely symbolic cap on executive compensation for a handful of the companies receiving federal bailout money. It does not apply to the 300-plus companies that already received federal help.
Companies that receive loosely-defined "extraordinary help" in the form of taxpayer bailout money will be subject to the following conditions, Obama said:
-- Top executives will have their pay capped at $500,000.
-- If they get any additional compensation it must come in the form of company stock that can't be cashed in until taxpayers get their money back out of the company.
-- They have to disclose their perks and "luxuries" and say why they're justified.
-- "The existing programs providing exceptional assistance to financial institutions prohibited the top five senior executives from receiving any golden parachute payment upon severance from employment, a ban that will be expanded to include the top ten senior executives. In addition, and at a minimum, the next twenty-five executives will be prohibited from receiving any golden parachute payment greater than one year’s compensation upon severance from employment," the White House said.
Here's the whole list.
Why is this a symbolic decree?
First, which companies are subject to these rules?
The White House just released something of a definition: "If a firm needs more assistance than is allowed under a widely available standard program, then that is exceptional assistance."
By our count, there are only three companies meeting those criteria: AIG, Citigroup and Bank of America. The White House agrees in its statement.
That's three of the more than 300 firms that have thus far gotten taxpayer bailout money.
Second, Obama's rules apply only to top executives in a company. Traders at financial firms can make millions of dollars more than the chief executive and are exempt from Obama's rules.
Nevertheless, Obama played up the tough talk during his announcement today, echoing his "I won" quote of a couple of weeks ago.
Obama said he rejects criticism of his $900 billion stimulus plan, "and so did the American people when they went to the polls in November."
February 4, 2009; 11:58 AM ET
Categories: The Ticker | Tags: AIG, Bank of America, Citigroup, Geither, Obama
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