I think the banks will evade the $500k compensation limit

[yodoobo]

Most of the guys have employment contracts that stipulate their compensation.

If the bank is banned by the Federal law from paying more than $500k, they'll be violation of their contracts with these execs.

What will probably happen is that the execs will then sue in civil court for the violation of the contract. The bank will then pay the excess as a civil judgment (not compensation), plus lawyer fees.

Or they'll just have their foreign subsidiaries pay them a "consulting fee".

Either way, these dirtballs will get their money. They always do.

[WatchWhatISay]

1. Time to renegotiate those contracts

In light of thier new dependence on public welfare for corporations. They wont have to comply with the $500k limit, if they dont want to take the bailout.

[yodoobo]

4. That assumes the partys WANT to renegotiate it

Remember, its a two party contract, but the executives control both sides.

No. They'll prefer to fight it out in court where the executives control both sides of the ligation and they'll receive the balance as a civil judgement.

[On the Road]

2. I Think the $500 Was Too Agressive

A $2-3 million limit would probably have been a more effective strategy.

Even if $500k is the optimal level, the goal is to prevent the most greivous excesses. Otherwise, the companies will either evade the limits or refuse government funding thereby reducing loans and increasing bankruptcy risks.

[Nicholas D Wolfwood]

5. While I agree with you in principle, I don't think it was feasibly politically.

There are people in this country that think someone making $50k is rich, much less $500k. While I don't dispute the efficacy of your strategy, Obama saying that $2-3 million was okay would be political suicide.

[On the Road]

10. The Problem is That from a Practical Point of View

the $500k is doomed. While the $20 million packages are grossly unfair, companies in practice are not going to accept the $500k limit and turn down the money, even if it puts the companies themselves at risk.

I suspect what's going to happen is that ways will be found to evade the limit with deferred compensation or something. If not, it's going to be dead on arrival. That won't be a good outcome politically or economically.

[Nicholas D Wolfwood]

11. I can't say I disagree.

If there's something I can truly fault Obama for it's his penchant for being far too populist. He's got to be willing to make some tough decisions and not rule by the whims of a mob that doesn't know enough about the issue.

[Ganja Ninja]

3. They'll find a way around it.

They'll come up with a plan like deferred compensation and get their money one way or another.

[quiller4]

6. Actually very few in financial services have employment contracts

Usually only the CEO and CFO have actually employment contracts that are binding but even those can be renegotiated.

[yodoobo]

9. The very few is the are the ones being targeted

This is not about rank and file. This is about executives who hire and fire the same people who write the contracts.

[nykym]

7. The thing I don't understand

is this,
You have these huge corporations with tons of lawyers who are well versed in writhing contracts, correct.
Now tell me why they add these compensation bonuses without a clause that says if you fail or leave NO BONUS!
or is it that they just do it and write it off at a loss?

[emrivers]

8. They will figure it out!

They will find a way around it. They always do... These guys are so used to making so much money they do not care if it belongs to tax payers or NOT!!!!!!!

[Hepburn]

12. If it is payable as compensation because of a breach of employment contract...

...IMO, it is compensation. A suit like this would not get around the government ban on the payment of a sum over $500K.

JMHO

[yodoobo]

13. Civil suit damages are not salary.

Sure the money is just as spendy, but we are talking about strict legal definitions instead of personal opinions.

Its just like when a worker receives a settlement from an employer for discrimination. Its a lump sum and social security tax is not even applicable.

[Hepburn]

14. Civil damages can be over an alleged breach of an employment contract...

...that = compensation.

I just sued and on this basis and trust me ~~ there are taxes owed on the compensation which is being paid.

[yodoobo]

15. Did you pay social security tax on it?

Or just State and Federal? I've never heard of fica and medicare being withheld from a civil judgment, but I might be wrong.

I don't disagree that you pay federal and state tax on civil judgments. I'm just saying that bankers will claim that a civil judgment awarded in a state civil court is not w2 compensation. They do have good lawyers and eat legal definitions for breakfast, lunch and dinner.

Remember, they'll be the plaintiffs, and their employees will the defendants.

Its not as if these guys are going to go running to Obama and ask permission to sue in state court. They'll just do it and we may or may not hear about it several years from now.