If you ask me, these execs ought to work for minimum wage until they get their house in order. Think of the lessons they'd learn. Obama's pay czar (that's right Beck: CZAR) is set to order pay cuts:
The Obama administration will soon order the nation's biggest bailed-out companies to drastically cut the pay packages of 175 top executives, a senior administration official confirmed to CNN Wednesday.
Kenneth Feinberg, who was named the White House's pay czar in June, will demand that each of the seven largest bailout recipients lower the total compensation for their top 25 highest paid employees by 50%, on average, the official told CNN.
For the past two months, Feinberg has been reviewing pay plans at Citigroup (C, Fortune 500), AIG (AIG, Fortune 500), Bank of America (BAC, Fortune 500), General Motors, Chrysler, GMAC and Chrysler Financial in an effort to put these firms in a position to pay back bailout money as soon as possible. CNN
Morgan Stanley CEO John Mack says he's trying to fix compensation but he doesn't appear to get it. "It's a war for talent." B.S. He says banks are an easy target:
Executive pay caps were stripped from the bill, but their salaries are now subject to an even harsher provision, thanks to Sen. Chris Dodd.
Apparently, Obama's economic advisors warned against adding Dodd's provision to the bill, but since Timothy Geithner wasn't tough enough on companies who received bailout money, the provision was added at the last minute. Now, all companies that receive bailout funds have to abide by the new rules, not just the companies that get the money going forward. And there's more:
NYT: A provision buried deep inside the $787 billion economic stimulus bill would impose restrictions on executive bonuses at financial institutions that are much tougher than those proposed 10 days ago by the Treasury Department.
The provision, inserted by Senate Democrats over the objections of the Obama administration, is aimed at companies that have received financial bailout funds. It would prohibit cash bonuses and almost all other incentive compensation for the five most senior officers and the 20 highest-paid executives at large companies that receive money under the Treasury’s Troubled Asset Relief Program, or TARP.
The stimulus package was approved by the House on Friday, then by the Senate in the late evening.
The pay restrictions resemble those that the Treasury Department announced this month, but are likely to ensnare more executives at many more companies and also to cut more deeply into the bonuses that often account for the bulk of annual pay. The restriction with the most bite would bar top executives from receiving bonuses exceeding one-third of their annual pay. Any bonus would have to be in the form of long-term incentives, like restricted stock, which could not be cashed out until the TARP money was repaid in full.
Some are complaining about a "brain drain." If the kinds of brains we're draining are the kind that will do anything for money, I say drain away! I'm sure they'll find someone to work for a lousy $500,000 or whatever.
But some experts on executive compensation warned that the restrictions could unleash unintended consequences, like encouraging banks to increase salaries to make up for diminished incentive pay. Even then, they warned, banks were likely to lose top talent.
“These rules will not work,” James F. Reda, an independent compensation consultant, said on Friday. “Any smart executive will (a) pay back TARP money ASAP or (b) get another job.”
The differences between Geithner's provisions and Dodd's:
The biggest difference between Mr. Dodd’s provision and the Treasury rules is that the new stimulus provision would apply to any company that either has received money or will receive money in the future under the Treasury’s financial rescue program. By contrast, the plan announced by Mr. Geithner would apply only to companies that receive federal money in the future.
The revised rules do not impose a formal cap on executive compensation, unlike the Treasury proposal. Under that plan, banks were barred from paying more than $500,000 in salary until they repaid the TARP funds to the government. (Banks were permitted to offer bonuses in restricted stock.) Senator Dodd’s rules, however, go a step further, prohibiting banks from awarding restricted stock to 25 top executives equal to more than one-third of their annual cash compensation until the banks have repaid all the money owed.
Geithner says next week he'll announce plans for substantial reforms to the financial services industry. More about executive pay caps, part of the reforms, here.
