Sanders: Capping Executive Pay Is Only a Start

[dcsmart]

Vermont Senator Bernie Sanders has the whole executive accountability issue exactly right.

Sanders calls President Obama's proposed $500,000 cap on salaries for top executives of corporations that accept taxpayer-funded bailouts "a step in the right direction."

But, Sanders says, Congress should "go further" and write stricter limits into law.

"People are furious that a handful of Wall Street executives–-through their greed and their irresponsibility and probably through illegal behavior-–have plunged us into a very deep recession," says the independent senator, who last year proposed capping compensation for executives of the companies that demand government aid at no more than the $400,000 salary paid to the president of the United States.

That's a sound standard.

Had it been applied when Sanders proposed it, taxpayers would have saved billions--yes, billions--of dollars. As Sanders notes, the brokerage units of New York financial companies that lost more than $35 billion in 2008 rewarded their executives for their failures with almost $20 billion in bonuses.

No one should be surprised that the CEOs used federal money to pad their private accounts. Before he voted against the Wall Street bailout last fall, Sanders warned the Senate that then-Treasury Secretary Hank Paulson's $700 billion giveaway plan would be abused. "This bill does not effectively deal with the issue of executive compensation and golden parachutes," the Vermont senator said. "Under this bill, the CEOs and the Wall Street insiders will still, with a little bit of imagination, continue to make out like bandits."
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FULL ARTICLE
http://www.thenation.com/blogs/state_of_change/405325sanders_capping_executive_pay_is_only_a_start

[chill_wind]

1. Sanders is right. It's full of mushy caveats and loopholes

and I'll just cut and paste what I posted yesterday, (since it went completely unacknowledged in one of those epic length cheering threads, I've no real reason to think anybody read it anyway :-)

All the CEO weeping/ DU rejoicing is probably out of all proportion to what the actual plan actually says in its present state. The news of the demise of fat CEO wallet has been vastly over-rated.

Most of the rock stars in this meltdown have already gotten theirs and will get to keep it, too, and depressingly enough-- those few left will pleasantly find it leaves lots of wiggle room for their maneuverings in the future.


The rhetoric is great, but I'll applaud even harder anybody who means and shows they can find a real way to outsmart Wall Street's smartest lawyers.

Bailout: Plenty of Limits to Obama’s New Exec Pay Limits
by Paul Kiel, ProPublica - February 4, 2009 2:30 pm EST

President Obama's administration still hasn't said just how it's going to use the second half of the $700 bailout bill, but today he rolled out his plan for limiting executive pay at companies that take federal money <1>.

The bottom line: The restrictions are stricter than the Bush administration's, but provide plenty of wiggle room for execs to do well. There is no real limit on executive compensation, just restrictions on the type of compensation.

To give you a clear idea of how these limits stack up against the limits imposed by the Bush administration, we've broken down the differences in two charts below.

The restriction getting the most attention is the limit on executive pay. The struggling companies that have gotten bailout money -- a group that so far includes AIG, Bank of America, Citigroup (the auto companies have separate limits) -- get one set of stricter limits. The top five executives at those firms will be prohibited from receiving compensation in excess of $500,000... with a caveat. They can land more as long as the extra compensation is somehow dependent on long-term performance, such as stock awards or options that can only be cashed out after a certain period of time. Today's press release <1> is vague in defining just how long that might be: either after the government gets all of its money back plus interest or until the bank seems relatively stable and on track to pay the government back. It's unclear who will decide that.

The new guidelines also require a vote by shareholders on the pay packages for the top execs -- but the vote would be a non-binding resolution, just a chance for shareholders to make their views known.

The restrictions on “healthy” banks will be even looser (and these aren't retroactive, only affecting a future round of investment in the nation's banks). There, the $500,000 limit isn't really a limit, but merely a disclosure requirement: Banks that want to pay their top five execs more will have to publicly disclose it. In that case, the shareholders would also have a chance to make their will known if the execs want more.

Here are the main guidelines for the struggling institutions compared to the ones used under the Bush administration:

(see charts and full text)

http://www.propublica.org/article/bailout-plenty-of-limits-to-obamas-new-exec-pay-limits-090204

Today (LA Times) :

Wall Street finds ways around executive pay caps


"Over the past 15 years there have been a number of efforts to put some sort of restriction on executive pay, both through legislation and through shareholder activism, and yet we see CEO pay continuing to rise," said Sarah Anderson, an executive-pay expert at the Institute for Policy Studies in Washington. "Wall Street has the best, shrewdest lawyers in the world looking to maintain these outrageous pay levels."

In 1984, for example, Congress sought to limit excessive severance packages, known as golden parachutes. Lawmakers changed the tax code so that any payment more than 2.99 times an executive's annual salary was hit with a 20% excise tax.

But most companies were only providing severance of one year's salary to their executives. Companies interpreted the new tax rules to mean that anything up to three times the salary was permissible, and severance packages rose to that level.

Many companies also responded by simply paying the executives' taxes -- a practice known appropriately enough as a "gross up."

Just as in the past, there are ways around Obama's rules.

First, they apply only to companies that receive government bailout money in the future. For companies that don't receive "exceptional financial recovery assistance" -- such as the outsize bailouts that went to AIG and Citigroup -- the restrictions on executive pay would be waived if the company discloses the compensation and allows a nonbinding shareholder vote.

Companies that don't have the restrictions waived still could pay an unlimited amount in restricted stock and other incentives. The incentives can be cashed in after the company has paid the government back, but also if the government decides after an undetermined period that the company has shown it is meeting its repayment obligations. The Treasury website did not detail what constitutes "exceptional" aid.

Also, while executive salaries are capped, there are no limits on the scores of mid-level Wall Streeters such as bond traders or investment bankers who typically pocket million-dollar bonuses.

(...)

[chill_wind]

2. K & R for Sanders. n/t

[natrat]

3. wtg bernie-probe congressional cayman island accounts also-ya know they exist

[Waiting For Everyman]

4. K&R for Bernie.

He's one of the few who isn't afraid, or bought.

[burning rain]

5. A wealth tax a la France would be a good step further.

Screw these parasites.