Obama’s Compensation Limits Amount to Zip

My oh my are the bloggers up in arms about the Obama compensation plans. The gnashing of teeth can be heard all the way out here in the West. It turns out that the new regulations are basically pablum.

You can get all the details at the Treasury Department's web site. It’s actually pretty short and easy to read. Here are some of the main points:

1. Compensation limit of $500,000 for senior executives of companies that received exceptional assistance from the government. Right now that means Citi, BofA and AIG. They can get stock awards but can’t sell the stock until they repay the government.
2. Requires a clawback of previous bonuses if any senior executive is shown to have engaged in providing inaccurate information. Note that this is basically a clawback for fraud only and again, we are talking about the exceptional assistance companies.
3. No golden parachutes for the top ten guys and and only one year’s worth of compensation for the next 25 in line. Again exceptional assistance companies only.
4. The exceptional assistance crowd has to have a non-binding “say on pay” provision for shareholders.
5. The exceptional assistance companies have to develop a policy on aviation services,k office renovations, parties and conferences.
6. The Treasury intends to issue further rules that apply to compensation relating to future participants in the generally available capital access programs. Compensation will be capped for this class but they can bust through it so long as they announce that they are busting through it and let the shareholders vote on it but the shareholders vote is non-binding (can you believe that?). Additionally, a limit of one year of compensation for golden parachutes for these guys and a clawback of prior bonuses if you can prove fraud. They also have to have a party or as the government labels it luxury expenditures policy.

That’s it. Three companies are going to see their executives get hammered and the rest of the original TARP crowd walks. There will be some new rules for anyone who wants to tap the money in the future, but they’re still working on it and anyway it won’t be anything that people can’t live with.

All the sound and fury of the past couple of days for this? It’s just political theater. Now let’s forget about it and get on to something substantive. Say, like keeping the economy from imploding.

Comments

[Watching th...:]

My one comment regarding the rationale of needing to pay top dollar to retain the best people:

If the company is tanking, you obviouslly DID NOT HAVE THE BEST PEOPLE!

The best is unwilling to settle for SLOP!

The best is unwilling to undermine the security of their country!

The best do whatever it takes to be truly successful!

The best hold themselves accountable!

The best do not make excuses!

The best are capable of basing decisions for long term good!

The best see no reason to lie!

The best do the right thing!


I saw very little of the BEST.

I have seen alot of mediocraty. I saw laziness. I saw a misguided belief set that America had retained a post WW2 cutting edge. I saw a blatant disregard for employees. I saw a blatant disregard for reality. I saw greed. I saw cowardness and an unwillingness for anyone to take a true stand.

This meltdown may be the best thing that has happened to America.

We have very little choice but to face reality now.

DO NOT TRY TO CAST BLAME TOWARD JAPAN, CHINA OR ANY OTHER COUNTRY.

No one took anything from us. WE GAVE IT AWAY!

Feb 05 09:57 AM

[John Polomny:]

This compensation bruhaha is just populist red meat for the hoi polloi.

Feb 05 10:01 AM

[kindle:]

No one took anything from us. WE GAVE IT AWAY!

What we gave away was worthless securities and fraudulent ratings on debt instruments.

I have no idea why Obama would waste his time grandstanding with such a pathetic set of restrictions.
The government should take first position in any bailout scenario. superseding bond holders, preferred equity owners, then bankrupt the companies and sell assets to private investors. There is no way that these firms can come out from under their debt.

Probably, what will happen is that we continue to support swindles like TARP and drum up support for them by spreading fear.

Feb 05 10:34 AM

[trw88:]

Couldnt disagree more, they are far more damaging than the non effect they have. It is more class warfare designed to drive a wedge between business and the have nots and they are really one and the same.

Feb 05 10:43 AM

[jamesa40:]

Can't believe that anyone would feign surprise at this. That's the way the system works so we have to deal with it.

Feb 05 10:56 AM

[nevjohn:]

All this grandstanding is really for Obama supporters:

1) Obama says bonuses are "shameful". Maybe he should have thought that when he voted yes on TARP. As a Senator, he took the taxpayers money and gave it to banks, who gave it to their execs as bonuses. The execs are laughing and don't care about all the noise now. The shameful behavior is that of the elected representatives like Obama who gave the taxpayers money away without first making sure it was not wasted.

2) What is the point of all these restrictions now? It means that Chuck Prince and Rubin (who destroyed Citi) walk away with hundreds of millions while Pandit (who is trying to fix the mess) has restrictions on compensation.

Feb 05 11:01 AM

[Doc 224899:]

"Obama limits CEO compensation"?

There is no legal way he can do that!

Who does he think he is? What does he think he is? He isn't some king or dictator. He is bound by laws, and there is no law that enables him to barge into corporate activities and impose regulations that haven't been passed into law.

Somebody needs to start keeping closer tabs on the way this guy is misusing executive privilege, over-stepping the law, and acting like a despot.

Isn't anyone else frightened by this slick, unilateral usurpation of power and influence, unfettered by checks and balances?

The corporate CEOs in question have all been functioning in a manner consistent with the community standard for professional practices in their field of endeavors. The entire financial community has been taken down by the inevitable consequences of many factors functioning over time, and it has occurred all over the globe. Everybody who was at the helm of a financial organization made decisions that, now, appear to have been disadvantageous. Up until a couple of years ago the most influential people in the world saw them as the standard for success. Pointing at them now, and demonizing them at this point, is nothing more than politically advantageous scape-goating.

We can't afford to let our government get away with distracting us from a careful study of the government's contribution to this mess by theatrically pointing at corporate management's contributions.

We also can't afford to allow a velvety usurpation of executive government power.

Feb 05 11:40 AM

[WMBANZAI7:]

WALL STREET RED INKY BONUS BOYS
(Heinrich Hoffman's Struwwelpeter, Inky Boys)
WilliamBanzai7

The Story of the Red Inky Bonus Boys
As he had often done before,
The newly elected President
One nice fine day went out
To see his constituents, and walk about;
Then Johnny Thain, little noisy banker wag,
Ran out and laughed, and waved his big red bonus flag;
And Vikram Pandit came in jacket trim,
And brought his French jet fleet and baseball stadium sponsorship with him;
And Ken Lewis, too, snatched up his toys
And joined the other naughty Wall Street boys.
So, one and all set up a roar,
And laughed and looted more and more,
And kept on singing,--only think!--
"Oh, Obama, we pay ourselves huge bonuses with taxpayer red ink!"
Now tall Secretary Geithner lived close by--
So tall, he almost touched the Wall Street sky;
He had a mighty regulatory inkstand, too,
In which a great Federal goose-feather grew;
He called out in an angry tone
"Boys, you better leave your Wall Street bonus toys home!
For, if Obama tries with all his might,
He he will put your loss riddled banks a bonus black hole overnite."
But, ah! they did not mind a bit
What great Geithner said of it;
But went on laughing, as before,
And hooting about their bonus hoard.
Then great Geithner foams with rage--
Look at him on this very page!
He seizes Thain, seizes Ken,
Takes Pandit by his little head;
And they may scream and kick and call,
Into the TARP black ink he dips them all;
Into the inkstand, one, two, three,
Till they are now bonus capped as capped can be.

Feb 06 12:23 AM