Congress balked at any serious compensation restriction last year. But President Obama will reportedly issue rules (an executive order, one assumes; unitary executive, anyone?) capping annual executive compensation at $500,000 for "companies that receive significant federal assistance in the future."
A politically savvy move, this compensation cap comes after mainstreet screamed bloody murder when the news of Wall Street bonuses of $18 billion (billion!) hit the airwaves and the Internet last month.
Although $500,000 sounds like a lot of money to most people -- and is 25% more than the president makes -- it's small potatoes in CEO circles. This restriction is not retroactive, however, looking at five of the firms that have gotten bailout money illustrates the gap (data from NY Times unless otherwise noted):
- AIG CEO Martin Sullivan; 2007 compensation valued at about $13.9 million included a base salary of $1 million. His 2007 compensation was about half of his 2006 compensation.
- Bank of America CEO Kenneth D. Lewis; 2007 compensation of more than $20 million included $5.75 million in salary and bonuses.
- Citigroup CEO Vikram Pandit (effective December of 2007) made $3.1 million in 2007.
- Chrysler owes $30 million in retention bonuses to about 50 executives; the company is now privately held.
- General Motors CEO Richard Wagoner; 2007 compensation of $14.4 million included $1.6 million in salary.
At least one analyst has called the measure "draconian" and he believes that executives wouldn't work for such a paltry amount of money. Given their track record, I say "good riddance." Time for some Trading Places.
Still unknown: how the Obama Administration plans to allocate the remaining $350 billion that Congress allocated for the Troubled Asset Relief Program (TARP). The Treasury Department announced Tuesday that 42 more banks have received $1.15 billion in exchange for preferred shares of stock. See TARP purchases detailed by the GAO.
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