White House Unveils New Restrictions On Executive Compensation
February 04 2009 - 10:57AM
Dow Jones News
Amid populist outrage over Wall Street excess, President Barack
Obama unveiled compensation rules for financial institutions that
accept "exceptional" government assistance, saying it is "in bad
taste" and bad strategy for banks to give executives lavish pay
packages during an economic crisis.
"We're going to be demanding some restraint in exchange for
federal aid - so that when firms seek new federal dollars, we won't
find them up to the same old tricks," Obama said at the White
House.
The president was joined by Treasury Secretary Tim Geithner, who
will release more details the administration's new financial rescue
package next week, a strategy widely expected to cost more than the
$350 billion remaining in the Troubled Asset Relief Program.
The new rules on executive compensation announced by the White
House moments before Obama's speech include a cap on salaries for
executives at companies that receive "exceptional" government aid.
That standard applies to firms that have bank-specific negotiated
agreements with Treasury, such as American International Group Inc.
(AIG), Bank of America Corp. (BAC) and Citigroup Inc. (C).
Under the new rules, companies that already have received rescue
funds from the Treasury Department will have to comply with
existing regulations. But top executives at firms that receive
exceptional assistance going forward won't be allowed to make more
than $500,000 a year. Any additional compensation would be made in
restricted stock that won't vest until taxpayer funds have been
repaid.
The regulations, designed to address populist rage at Wall
Street excess while not discouraging banks from participating in
the Treasury's Troubled Asset Relief Program, are stricter than
existing regulations. Under the old rules, recipients of government
assistances couldn't take a tax deduction on executive compensation
above $500,000.
"This is America. We don't disparage wealth," Obama said. "We
don't begrudge anybody for achieving success. And we certainly
believe that success should be rewarded. But what gets people upset
- and rightfully so - are executives being rewarded for failure.
Especially when those rewards are subsidized by U.S.
taxpayers."
-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256;
henry.pulizzi@dowjones.com