Later this morning the White House and Treasury Department will announce new restrictions on executive compensation on financial institutions receiving government funds.
An Obama administration official tells ABC News that under the new rules, companies receiving exceptional assistance from the Department of the Treasury – such as AIG, for example – will face executive compensation limits of $500,000 a year.
This new limit comes with one exception: Additional compensation can be allocated in restricted stock that will not vest until taxpayers have been paid back – the contractual dividends plus interest – or after specified period according to conditions that consider the degree a company has satisfied its repayment obligations as well as lending and stability goals,among other factors.
Banks receiving TARP funds will face tougher restrictions than exist now, the Obama official says, including restrictions on golden parachutes and “say on pay” shareholder policies. Banks will also face tougher transparency rules, including on expenses such as aviation services (thank you Citigroup), office renovations (thank you John Thain), conferences and events, entertainment, holiday parties, and golden parachutes.
Of course now, I guess its not private industry anymore, so why not.
If these are “Loans” then there always “Conditions” to the loans. I think making this “Retroactive”, IOW saying "If you have received money these conditions apply would be wrong but saying “If you take any more money these are the conditions” then I have no problem with it.
If this is “A gift” then indeed these companies are no longer private industry, although I would say the same rules apply.
If I went to the bank and asked for money they would make a certain number of conditions I must comply with. Personally I would never accept a loan that put some arbitrary limit on how much I could make, but that’s me.
This is a TERRIBLE idea. The good executives will leave in droves for places where they are paid well leaving a bunch of losers to run complex operations. Why doesn’the just nationalize the banks and have civil servants run them. That would be a better idea.
Which good executives are you referring to? The companies that have accepted govt. bailouts were/are run so badly that in normal economic times they would be out of business or bankrupt or both by now.
Stupid is as stupid does…it was stupid to give them bailouts and its even stupider to cap anyone’s pay.
As it says in Proverbs: “The borrower is slave to the lender”. And in this case, the govt will change the rules based on what direction the wind is blowing. I am more convinced than ever that they have lost their freaking minds. We are doomed.
This is a TERRIBLE idea. The good executives will leave in droves for places where they are paid well leaving a bunch of losers to run complex operations.
I just had this discussion here at the office.
First all of these “Good executives” are the same one that drove these companies to the point of needed “Bailout cash”. Second after watching many of these “Good” executives make millions and jump from one failure to another I question if they can even make companies work or have the talent to do so or whether they just happen to have gone to the right schools and know the right people.
Second if they indeed can make the companies “Work” then why would they not jump on this. This new limit comes with one exception: Additional compensation can be allocated in restricted stock that will not vest until taxpayers have been paid back In essence a “Stock option” based on the return of the company to profitability. 500K plus basically limitless stock and all you have to do is pay back the loan.
Third if indeed you are “That good” then why would you stay at a company just for the pay knowing that it’s a failing company and there’s nothing you can do to turn it around? So if you’re “That good” you’re either going to take the stock option and make a killing turning the company around, or there’s nothing you can do and you’d be leaving anyway.
The only people that would stay at a failing company for the money are the ones that know there’s nothing they can do because they aren’t “Good enough” and have someone or something else to blame the “Failure” on, all the while getting paid serious coin…for sucking at their job.
I don’t think it’s such a bad thing…it means you can fuck up really bad and you still get up to a $1/2M bonus! Geee…hire me, hire me!
I sure can’t do the job and WILL fuck up, and will need bailout money, and still, I get my salary and up to $500,000…
Considering WE are paying the bailout, it’s not a bad thing.
Okay, so let me get this straight. Wachovia is on the brink of absolute disaster. If that bank fails it will take a whole host of people and things down with it, same thing with the mortgage company in California whose name escapes me at the moment. Wells Fargo steps in buys said mortgage company AND Wachovia, takes federal money in the mean time. Now you are going to cap the pay of arguably one of the better run banks in America who is actually doing good things right now?
Secondly, in Massachusetts well run banks are REFUSING bailout money because of all the strings attached. Said money is supposed to fuel mortages and small business loans. So…said banks are refusing to take this and instead sticking with their tighter restrictions on lending and underwriting. You really think this is going to get them to accept federal bailout money to free credit markets.
Francois…the credit markets are FROZEN. This essentially means that banks aren’t lending. Why aren’t they lending because they don’t want to underwrite risk OF ANY KIND. So TARP funds are supposed to free up said markets.
You really think banks are going to take these funds if it means the government is going to micromanage the details? Ain’t gonna happen.
Nationalize the banks if you want socialist policies but don’t try to shoehorn them into capital markets. IF it walks like a duck, talks like a duck, and looks like a duck it probably is a duck. As my favorite client said this morning it is time to shoot the damn duck! (and that comment is directed at the IDEA not at any person, place or thing)
…or whether they just happen to have gone to the right schools and know the right people.
That’s the problem. As it stands, any jerk-off with the right connection can come in, make terrible decisions, and leave with several million…for what?
I find it ironic that the conservative capitolists would be opposed by such a system. If you want to make money, then you need to earn it. Otherwise its just corporate communism for the rich. i don’t care if the stock options give the execs 10 billion $ if they get the company back on its feet. That’s a hell of a lot better than have someone come in, do nothing, and walk away with $10 million.
The basic idea behind making money with investments is that you cannot make money with no risk. If they’re not willing to take risks of any kind, then, they should just do something else.
Now you are going to cap the pay of arguably one of the better run banks in America who is actually doing good things right now?
Yes absolutely because no “Good” executive would make an aquisition and put their company at risk. The only reason these companies did this is because they knew they were going to get billions from the government.
Secondly, in Massachusetts well run banks are REFUSING bailout money because of all the strings attached.
Good for them.
So…said banks are refusing to take this and instead sticking with their tighter restrictions on lending and underwriting. You really think this is going to get them to accept federal bailout money to free credit markets.
No, and again good for them. We need to have tighter lending restrictions as this was part of the problem in the first place.
Credit markets will naturally free up as people figure out what the hell just happened. Hopefully they will come to the conclusion that a guy making 50K a year can’t afford a 400K house and get a loan for 103% value
This is a TERRIBLE idea.
Actually the bailout was a terrible idea. If indeed these are loans, ALL loans come with some sort of restrictions. You either accept the terms or not.
Look I am not lying when I say I am in the middle of negotiating two lines of credit for two different companies. The banks want NO risk. Never in my lifetime have I seen a situation like we are facing right now.
When you read that the credit markets are stuck they are stuck. I have no problem with bad bankers being bounced from there jobs but if the government is going to micromanage how the banks are run and expect said banks to jump in and take government money I can assure you it won’t happen and good companies will continue to struggle and eventually close for lack of capital.
I have no confidence in the ability of the government to get this right and ideas like this only make matters worse in my book. We never should have started down this road and now that we are on it we are only making it worse.
