Wall Street has to adopt a bitter buzzword: restraint
February 6, 2009
Last week Barack Obama chided Wall Street for its “shameful” greed.
This week he did something about executive pay packets, beginning with the banks seeking large amounts of taxpayer assistance.
Under new restrictions, a company seeking government help must cap executive salaries at $US500,000 a year.
“This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded,” the President said when announcing the salary caps.
“But what gets people upset – and rightfully so – are executives being rewarded for failure. Especially when those rewards are subsidised by US taxpayers.”
Mr Obama said the bonuses and salary packages that made the headlines during the economic crisis were not only “in bad taste – it’s a bad strategy“.
“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.”
Stock options will be permitted but they cannot be exercised until the company repays the capital and interest to the Government. But the measures will affect only a small group of companies and are not retrospective. The rules, which will presumably be included in loan agreements, apply only to companies that receive the deep-pocket, tailor-made assistance given to Citigroup, AIG and Bank of America.
Other companies receiving more generalised capital access assistance will be asked to comply with “guidance” measures proposing a similar $US500,000 cap, unless waived specifically by shareholders.
The companies will be expected to disclose their remuneration packages publicly and, if executives are discovered to have misled the markets about the state of the company, they will be subject to repaying any bonuses paid to the top 25 executives.
Mr Obama has been a big believer in the power of the bully pulpit, and he hopes to shame senior executives into restraint.
On Wednesday Wells Fargo – which had received billions to help it buy the struggling Wachovia Bank – cancelled a lavish event planned for the Wynn casino in Las Vegas after an outcry in the media and reprimands from members of congress. It will pay the hotel hefty compensation.
Bank of America has put up for sale three corporate jets and a helicopter owned by the newly acquired Merrill Lynch.
“As part of an ongoing cost reduction effort, we have been scaling back on our use of corporate aircraft including selling three we own and the Merrill Lynch helicopter,” said a spokesman, Scott Silvestri.
The Partnership for New York, a business lobby group warned the salary restrictions could damage the city.
“Without the talent of Wall Street to bring us back into a position of leadership in the global economy, we’re going to be in bad shape,” said a spokeswoman, Kathryn Wilde.
There is a very dangerous trend beginning to show here.
Why is there so little outrage against the Obama intrusion on the corporate fabric?
http://pacificgatepost.blogspot.com/2009/02/obama...
What will this lead to?