"Obama to detail further compensation limits President Barack Obama wants to impose a $500,000 pay cap on executives whose firms receive government financial rescue funds, a dramatic intervention into corporate governance in the midst of financial crisis.
"But note further in there is a loophole around that $500,000 limit" -- Wake the Flock Up
"Obama to impose salary cap on executives at bailed-out firms" by Edmund L. Andrews and Vikas Bajaj, New York Times | February 4, 2009
WASHINGTON - The Obama administration is expected to impose a cap of $500,000 for top executives at companies that receive large amounts of bailout money, according to people familiar with the plan. Under new rules to be announced by the Treasury Department as early as today, executives would also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends....
Executives at companies that have already received money from the Treasury Department would not have to make any changes. But analysts and administration officials are bracing for a huge wave of new losses, largely because of the deepening recession, and many companies that have already been to the trough may well be coming back.
Really?
"The limits would not apply retroactively to any bank that received money from the first half of the $700 bailout allocated by Congress. For example, the restriction would not apply to such firms as American International Group Inc., Bank of America Corp., and Citigroup Inc., that already have received such help"
Don't you just love lying jewspapers?
Crucial details remained unclear last night, including whether the restrictions would apply to all companies that receive money under the so-called Troubled Asset Relief Program, or TARP, or whether they would apply only to the "exceptional" companies that were being rescued from collapse. Under the Treasury's $700 billion rescue program, most companies that have received money so far have been considered healthy rather than on the brink of collapse.
But five of the biggest companies to get help -
According to Equilar, an executive compensation research firm, Kenneth D. Lewis, the chief executive of Bank of America, made more than $20 million in 2007. Of that, $5.75 million was in salary and bonuses. Vikram S. Pandit, who became chief executive of Citigroup in December 2007 and previously held other senior positions at the bank, made $3.1 million. Richard Wagoner, the chief executive of General Motors, made $14.4 million, much of it in stock, options, and other noncash benefits. He received a $1.6 million salary.
"That is pretty draconian; $500,000 is not a lot of money, particularly if there is no bonus," said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm....
These people ARE ILL!!!! Not a lot of money with no bonus, huh?
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Few leaders of Massachusetts banks would lose any pay under new limits on executive compensation proposed by President Obama yesterday, executives and analysts said.
The rules, designed to "restore trust" following what Obama called "shameful" payouts to top executives, would cap pay at $500,000 at some unhealthy banks that receive future grants of taxpayer money, although additional compensation in the form of restricted stock awards will be allowed. Other banks that receive federal help would have to give shareholders notice if they want to pay senior executives more.
Oh, so there ARE NO LIMITS! The greedy pigs will just get stock awards instead of taxpayer cash!
But at many of the state's banks, senior executives are already paid less than $500,000 a year....
Other banks have structured senior executive pay to emphasize stock awards, which would be permitted under the new rules. Berkshire Hills Bancorp, which got $40 million from the Treasury, paid chief executive Michael P. Daly more than $1 million in 2007. But only $400,000 of that came in salary, while much of the rest was in stock awards.
Indeed, of the nine banks in Massachusetts that have received money under the Treasury Department's so-called capital purchase program, none would be considered the sort of unhealthy institution that faces the tightest restrictions on pay, said Bruce Spitzer, a spokesman for the Massachusetts Bankers Association.
Wayne Abernathy, a policy specialist for the American Bankers Association in Washington, said the rules seem designed to allow flexibility on pay so banks would keep applying for the funds. Many member banks have been hesitant to do so, he said, "because every week they're reading about a new recommendation from someone in Congress and bankers are saying, 'I don't need this increased trouble.' "
You happy with the Obama stroke job, 'murka?
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Given the unpopularity of many of the Treasury's programs and the lucrative payouts many companies granted in the past, several executives were resigned to the idea that pay would come up for review....
When Chad Gifford, Bank of America's former chairman retired from Bank of America in 2005 he received a retirement package that included a $16.3 million lump-sum payment for past accumulated earnings, an $8 million bonus for his year as chairman of the bank after its purchase of FleetBoston Financial, a $3.1 million annual pension, and use of a jet and other perks. A spokesman for Gifford noted the pay reflected a healthy period in the bank's performance including a successful merger, and was approved by the board.
And therefore, greed and gluttony are O.K.
Pay for the leaders of two of the state's largest banks, Citizens Bank's Ellen Alemany and Sovereign Bank's Gabriel Jaramillo, is not disclosed because both institutions are owned by foreign entities: Britain's Royal Bank of Scotland and Spain's Banco Santander, respectively. For the same reason, neither bank has been eligible to apply for the government funds.
Executives at several banks that have already received Treasury funds said they were willing to accept restrictions. Christopher Oddleifson, chief executive of the parent of Rockland Trust, which sold the government stock worth $78 million, was paid more than $1 million in 2007, including $480,770 in salary plus a bonus of about $200,000. In his contract, he also had been promised a "golden parachute" severance package worth more than $1 million if the bank were sold, but he agreed to give up the payout to receive the previous funds....
Isn't that just saintly of him.
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"Bringing salaries down to earth; Executives don't like limits; most others do" by Todd Wallack and Erin Ailworth, Globe Staff | February 5, 2009
What limits?
Local taxpayers yesterday applauded President Obama's $500,000 planned cap on executive pay. Unless they happened to be an executive.
"It's about time, especially in these economic times when people can't pay their bills," said Mark Nolan, a captain with Boston Harbor Cruises.
The new rules would limit pay for executives at companies that accept government bailout money. They also clamp down in other ways, such as by cutting severance packages; requiring boards to create corporate spending policies for corporate jets, holiday parties, and other luxury expenses; and allowing firms to recoup pay from executives who commit fraud.
Mike Long, who drives a cab for Bay State Taxi, said Obama's plan doesn't go far enough - Long would set a $200,000 pay limit. "It's absolutely criminal that these guys are getting paid that much anyway," he said. "The country is in economic crisis, and these guys continue to reap massive benefits."
Janet Proctor, 67, a retired social worker who lives in Framingham, said, "To think about anyone making millions for bonuses just seems ridiculous."
But some local business leaders attending a Boston College Chief Executives' Club luncheon yesterday said limiting pay will unfairly penalize executives who are doing good work in tough times, and even discourage some from staying on the job.
They just don't get it, do they?
"I think realistically we understand there will be some limitations. I would hope as these are crafted, they'll be reasonable," said Chad Gifford, the former FleetBoston chief executive who serves on the Bank of America Corp. board. But executive pay should depend on how well a company and its shareholders do, Gifford said, not an arbitrary limit.
And if your company LOSES MONEY, you gonna take a CUT?
"I think for somebody who is creating, in my opinion, tremendous value, to have a straitjacket like that . . . it is probably too low," he said of the $500,000 ceiling. Robert Smyth, Massachusetts president for Citizens Bank, which is not eligible to get federal aid because it is owned by the Royal Bank of Scotland, said the new standards warrant more discussion.
"You don't want to stifle incentives," Smyth said. "You have to be careful of going overboard, particularly in these times."
William Morrissey, an executive vice president at Central Bank in Somerville, took a slightly different view. "It's only reasonable to put a cap on CEO salaries" for companies that seek government assistance, Morrissey said.
"Everyone should feel a little pain in these periods."
John Fish, chief executive of Suffolk Construction Co., said companies can best limit compensation on their own. "Although the numbers sound outrageous, people have to look at the context and how people are doing," Fish said.
Fish also said some of the largest pay packages that made headlines over the past few years were part of a bygone era.
"We're in a whole new era of business," he said. "The marketplace itself will put pressure on the compensation system."
You would think so, but....
Robert Reynolds, chief executive of Putnam Investments, a Boston mutual fund company, said fixing the financial industry will take talented people who are paid well for their efforts. "The best people will go to other places to work" if their compensation is limited, Reynolds said. Still, he added, "I can see why you'd want to get rid of abuses."
If they don't want the job, I'LL TAKE IT, 'kay?
But some compensation specialists said they doubt whether Obama's plan will have its intended effect - forcing companies to do away with executive excesses. For instance, the rules won't affect American International Group, Bank of America, Citibank, State Street Corp., and other major financial institutions that have received billions of dollars in taxpayer money, unless they seek more bailout funds. In a press release yesterday, the Treasury Department said the new rules are not retroactive....
In addition, financial executives will still be entitled to receive millions of dollars a year in restricted stock, stock options, and other long-term incentive awards - provided they don't cash in the awards until after the institutions have repaid the government bailout money. And most of the harshest restrictions only apply to companies that receive aid under certain programs.
Some noted that past efforts to crack down on pay have backfired. In 1993, Congress tried to cap salaries at $1 million by voting to make companies pay taxes on pay above that level. But companies increased other forms of executive pay, including stock options and stock grants, which often turned out to be far more lucrative than the salaries and may have helped drive up executive compensation overall.
And I'm sure they will also find ways around this.
"Any time you set any arbitrary limit, either people leave or they evade it, and neither is helpful," said Charles Elson, chair of the of the John L. Weinberg Center for Corporate Governance at the University of Delaware....
Representative Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee, acknowledged Obama's proposal has limits, but said it's more than anything the Bush administration did to monitor compensation....
And more than you did, too, Barn!
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