Guess there’s gonna be a lot of resumes flying around as the high income people bail....

How is the government going to define "top executives"? Will the key money managers, traders, economists, etc. find the pastures greener at the mutual funds and the foreign banks? Then the jobs will be filled by the younger and less experienced.

I see the law of unintended consequences coming....

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.

Executives would also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends.

President Obama and Treasury Secretary Timothy F. Geithner plan to announce the executive compensation plan on Wednesday morning at the White House.

The new rules would be far tougher than any restrictions imposed during the Bush administration, and they could force executives to accept deep reductions in their current pay. They come amid rising public fury about huge pay packages for executives at financial companies being propped up by federal tax dollars.

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 received federal money may well be coming back.

Crucial details remained unclear on Tuesday 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 — Citigroup, Bank of America and the American International Group, General Motors and Chrysler — were all facing acute problems. And top executives at those companies made far more than $500,000 in recent years.

Kenneth D. Lewis, the chief executive of Bank of America, took home more than $20 million in 2007. Of that, $5.75 million was in salary and bonuses.

Vikram Pandit, who became chief executive of Citigroup in December of 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 non-cash benefits. He earned 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. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

“It would be really tough to get people to staff” companies that are forced to impose these limits, he said. “I don’t think this will work.”

President Obama last week branded Wall Street bankers “shameful” for giving themselves nearly $20 billion in bonuses as the economy was deteriorating and the government was spending billions to bail out some of the nation’s most prominent financial institutions.

“If the taxpayers are helping you, then you have certain responsibilities to not be living high on the hog,” Mr. Obama said Tuesday, in an interview with “NBC Nightly News.”

Mr. Obama’s new rules are coming just as he is expected to ask for additional sums of money, beyond the $700 billion already authorized, to prop up the financial system, even as he pushes Congress to move quickly on a separate economic stimulus package that could cost taxpayers as much as $900 billion.

If the new pay limit applies to all companies that receive Treasury money, it would be almost as tough as a $400,000 limit proposed last week by Senator Claire McCaskill, Democrat of Missouri.

Senator McCaskill, reacting to reports of extravagant perks and bonuses at companies like Merrill Lynch and Citigroup, had blasted Wall Street executives as “a bunch of idiots” who were “kicking sand in the face of the American taxpayer.”

The banks that have received bailout funds already are subject to limits on compensation, but the Bush administration intentionally left them lax. The top five executives at banks that get an equity infusion from the government are restricted from offering golden parachutes, as rich severance packages are called, and any compensation above $500,000 is not tax deductible to the company.

Companies that received emergency money, like Citigroup, faced somewhat tougher restrictions, including a requirement to reduce the bonus pool for the top 50 executives by 40 percent. But even those restrictions come nowhere near the $500,000 cap.

In a letter to Congress last month, Lawrence H. Summers, director of Mr. Obama’s National Economic Council, suggested that the new pay restrictions would apply to all companies that get Federal help.

Without mentioning a particular dollar limit, Mr. Summers wrote that “executive compensation above a specified threshold amount be paid in restricted stock or similar form that cannot be liquidated or sold until the government has been repaid.”
http://www.nytimes.com/2009/02/04/business/04pay.html?_r=1&hp

OK, cap the salaries but if memory serves me correct, these people make more money in stock options and other pay then their salary.

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Hopefully it will provide some incentive to avoid taking gov bailout money to begin with.

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That's the Socialist way,isn't it.Throw a bone to appease the angry masses.
This will simply lead to more cheating and theft as these execs find more creative ways to enrich themselves.

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I believe that's correct. And consider that a lot of companies hid dollars in so many ways in the first place, that there are certainly more than a few ways to hide executive incentives and not call it "salary".

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How true. If it were up to me I would just put the leeches on them.

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How apropos..use a leech to bleed a leech.

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There are no limits on the pay of the lawyers guiding the bank. So you think any bank General Counsel is going to stick around if he can make $2MM as a partner at a law firm working with the same bank.

Or any Chief Investment Officer if he can do the same at a hedge fund?

Agreed on the arrogance, but I’m afraid Congress is making a mistake if it wades into compensation issues.

It is a popular (i.e. vote-getting) response.

You have made two accurate statements. What you may or may not realize is that the popular response gets them a job in the next election, which explains why they do it.

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Yes I realize it.

However I still find it extraordinary that the President can request Congress to enact limits on compensation.

I have no doubt he can get it, as it will be an enormously popular (from a vote-getting viewpoint) position to take.

Doesn't make it right.

What's next, limit the compensation of MD's who receive Medicare payments for procedures?

Baseball players, if the teams receive tax benefits from municipalities?

Hedge fund managers, if the funds handle state and local government investments?

Popular, yes.

Starting on a slippery slope, yes to that as well.

Zactly.

Law of Unintended Consequences.

When it comes to politicians, they will have to really work hard to surprise me.

Which is why he is doing it. Win, lose or draw, he wins.

No but since when does politics have anything remotely related to doing what is right except by pure coincidence?

That might be what he does next to make healthcare for all a possibility.

Perhaps so but by the time it breaks apart, he will be long out of office and retired. So it will be the next fool's problem.

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My understanding is that there will be a limitations as to when they can cash out their stocks as well.

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I can hardly wait to see the emergence of the "Workers' Commissariat for Fair Compensation."

How much should a rock star be paid per concert? How much should an author get paid per book? Is a hard-working lawyer really more valuable in our lives than an unemployed gardener who means well?