The Obama admnistration yesterday announced that it would impose a $500,000 cap on executive salaries at institutions that participate in TARP -- known affectionately as the "bailout." The policy comes after the public became outraged over reports of corporate jets, high salaries and other "shocking" details (yes - sarcasm) and lavish spending among TARP participants.
The Department of Treasury released an official statement of the policy. Here are some highlights.
The salary cap is mandatory only for executives at institutions that receive "extraordinary" assistance, or bank-specific agreements with the government, rather than the generalized assistance available to all banks. This is a smaller subset of TARP participants.
General TARP participants can waive the $500,000 salary restriction -- if they make the salaries public and explain why they are not excessive.
The salary cap does not include restricted stock awards.
Stock awards cannot vest until after the company has paid the government in full, plus interest -- or (a major exception) "after a specified period according to conditions that consider among other factors the degree a company has satisfied repayment obligations, protected taxpayer interests or met lending and stability standards." Translation: If the company becomes healthy again, the executives can get their stock awards.
My favorite is the anti-plane rule (my language). This do-nothing provision purports to establish policy related to "aviation services, office and facility renovations, entertainment and holiday parties, and conferences and events." The companies' boards of directors must adopt policies on these matters and place them on their webpages.
Oh, and these requirements do not apply retroactively to current TARP participants.
Update: LA Times article reports that corporate watchdogs say policy is pretty weak.
Showing posts with label EXECUTIVE SALARIES. Show all posts
Showing posts with label EXECUTIVE SALARIES. Show all posts
Thursday, February 5, 2009
Monday, September 29, 2008
READING THE FINE PRINT: BAILOUT IS STILL A DEAL PRIMARILY FOR BANKERS
I read through the bill and intended to write a full analysis. Fortunately, ABC News has captured some of the same concerns I had: Does the Bailout Ignore Homeowners, Execs?
Although Pelosi, Reed and other members of Congress announced with much fanfare that the legislation would include "relief" for homeowners and cap corporate salaries, the proposed legislation only moderately delivers those promises. For example, the limit on executive salary only applies if the government purchases $300 million or more in assets from the company. Although the bill would prohibit "golden parachutes," it would exempt existing employment agreements from this provision. The proposed legislation would only impose additional tax burdens on companies that pay extremely high salaries; it would not explicitly limit those salaries.
As for homeowners struggling to pay their mortgages, the proposed legislation would only help those persons whose mortgages the government purchases. Also, the legislation only requires the Secretary of the Treasury to write a plan to "mitigate" foreclosures and to help funnel distressed borrowers through existing assistance programs. The bill does not provide any money at all for foreclosure prevention.
I heard Dennis Kucinich rail against the bill today on C-Span. It was a great speech. Also, true conservatives in the House (i.e., those who hate "big government") seem bothered as well. But the Senate seems bent on getting the bill passed. After all, it probably will help the economy somewhat, but most importantly, two members of the Senate are running for president. Their colleagues do not want voters to view their respective parties as responsible for blocking a bill designed to save banks (or was it "the" economy?). Tune in for more updates.
Although Pelosi, Reed and other members of Congress announced with much fanfare that the legislation would include "relief" for homeowners and cap corporate salaries, the proposed legislation only moderately delivers those promises. For example, the limit on executive salary only applies if the government purchases $300 million or more in assets from the company. Although the bill would prohibit "golden parachutes," it would exempt existing employment agreements from this provision. The proposed legislation would only impose additional tax burdens on companies that pay extremely high salaries; it would not explicitly limit those salaries.
As for homeowners struggling to pay their mortgages, the proposed legislation would only help those persons whose mortgages the government purchases. Also, the legislation only requires the Secretary of the Treasury to write a plan to "mitigate" foreclosures and to help funnel distressed borrowers through existing assistance programs. The bill does not provide any money at all for foreclosure prevention.
I heard Dennis Kucinich rail against the bill today on C-Span. It was a great speech. Also, true conservatives in the House (i.e., those who hate "big government") seem bothered as well. But the Senate seems bent on getting the bill passed. After all, it probably will help the economy somewhat, but most importantly, two members of the Senate are running for president. Their colleagues do not want voters to view their respective parties as responsible for blocking a bill designed to save banks (or was it "the" economy?). Tune in for more updates.
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