Obama sets executive pay limits - CNN.com
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WASHINGTON (CNN) -- Pledging to take "the air out of golden parachutes," President Obama announced Wednesday that executives of companies receiving federal bailout money will have their pay capped at $500,000 under a revised financial compensation plan.
$500,000 will be the limit on executive salaries at companies receiving tax dollars, President Obama says.
$500,000 will be the limit on executive salaries at companies receiving tax dollars, President Obama says.
Last year's "shameful" handout of $18 billion in Wall Street bonuses "is exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis: a culture of narrow self-interest and short-term gain at the expense of everything else," Obama said to reporters at the White House.
"For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste -- it's a bad strategy -- and I will not tolerate it. 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," the president added.
Under Obama's plan, companies that want to pay their executives more than $500,000 will have to do so through stocks that cannot be sold until the companies pay back the money they borrow from the government. The rules will be implemented by the Treasury Department and do not need to be approved by Congress.
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The restrictions will most affect large companies that receive "exceptional assistance," such as Citigroup.
The struggling banking giant has taken about $45 billion from the government's Troubled Asset Relief Program.
The new rules also will mandate that shareholders of banks have a greater say about the salaries paid to company heads. The measures will put in place greater transparency for costs such as holiday parties and office renovations.
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Obama also pledged further reforms in the future, promising that the administration will "examine the ways in which the means and manner of executive compensation have contributed to a reckless culture and quarter-by-quarter mentality that in turn have wrought havoc in our financial system." Video Watch Obama talk about limiting executive salaries »
"We're going to be taking a look at broader reforms so that executives are compensated for sound risk management and rewarded for growth measured over years, not just days or weeks," Obama said.
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I have to say, I salute Obama for taking this stand. I never supported the massive free-money grab-bag we're passing off as a stimulus plan, however I regained a lot of respect for Obama for this.
The primary reason I was severely opposed to the stimulus plan was it rewarded companies who took the huge risks. The risks allowed massive amounts of capital to flow into a company during the golden years, and I felt they should pay the piper during the bad years. I saw the stimulus packages as rewarding bad behavior while the companies who shied away from such risks as being double-punished.
At least this prevents the head honchos from being double-rewarded.