High-flying executive salaries may soon be reined in – at least in companies that have received aid from the US government. Executive paychecks were in the spotlight as US President Barack Obama imposed a tough new rule to cap-executive compensation at USD 5,00,000 a year. He called bonus payouts at banks getting TARP (Troubled Assets Relief Program) funds “shameful”. Obama also urged Congress to finish work on the economic stimulus legislation.
Obama said, “The companies receiving Federal Reserve’s aid are going to have to disclose publicly all the perks and luxuries bestowed upon senior executives and provide an explanation to the taxpayers and shareholders as to why these expenses are justified. And we are putting a stop to these kind of massive severance packages and we are taking the air out of golden parachutes.”
“We all need to take responsibility,” Obama said. “And this includes executives at major financial firms, who turned to the American people hand in hand, when they were in trouble, even as they paid themselves customary lavish bonuses,” he added. Calling it the height of irresponsibility, Obama termed the high salaries “exactly the kind of disregard of costs and consequences of their actions that brought about this crisis.”
With the party now getting over for the top executives of companies, CNBC’s John Harwood provides an analysis on the same.
The question is how broadly they apply the most stringent limits at USD 500,000 plus stock that cannot be sold until the company repays the government applies only to those firms receiving what is called ‘exceptional assistance’ – firms like AIG, Citi and Bank of America. But it only applies going forward not any of those deals that have already taken place.
So, as of this moment none of those most stringent restrictions are applied to anybody. For other programmes for people getting the ordinary TARP assistance that a lot of companies have got in the so-called generally available programmes, there is the same USD 500,000 limit, but it can be waived by vote of shareholders they are accounting on transparency to limit a lot of what they consider abuses.
They are also trying to say that companies that receive this taxpayer funding – to the extent they are doing entertainment – super-ball parties or corporate retreats that might come in for criticism, they need to post policies on how they decide to spend that money and put the particulars on the website, so the public can have a look at it again figuring that sunshine is the best disinfectant as they say in politics.
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