President Obama revealed major compensation reforms today that will limit significantly the pay of executives at companies receiving federal bailout money.
President Obama revealed major compensation reforms today that will limit significantly the pay of executives at companies receiving federal bailout money.
"In order to restore our financial system, we've got to restore trust," said Mr. Obama, flanked by Treasury Secretary Timothy Geithner at a press conference this morning. "And in order to restore trust, we've got to make certain that taxpayer funds are not subsidizing excess compensation packages on Wall Street."
Specifically, annual compensation for top executives will now be capped at $500,000 if their companies elect to receive federal aid. Any other compensation to these executives must be made using restricted stock that will not be worth its full value until their companies completely pay back to the government any federal funding they asked to receive.
Mr. Obama's reforms come roughly one week after a report from the New York state comptroller revealed that Wall Street firms paid out $18.4 billion in cash bonuses for 2008.
"For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste, it's a bad strategy," Mr. Obama said. "And I will not tolerate it as president."
In addition to the cap on total pay, any company receiving capital from the government will also be required to disclose all of their top executives' perks, such as use of a company jet, and offer a detailed explanation of these expenses.
They will also be required to limit severance packages and “golden parachute” payments to top executives under Mr. Obama's new reforms.
