Congress Targets Executive Pay

Posted by: Jane Sasseen on September 23

Executive pay has emerged as one of the most contentious issues in the negotiations over the Treasury Department’s proposed $700 billion deal to buy up Wall Street’s junky morgage-related debt. Democrats in Congress, led by Barney Frank (D-Mass), the powerful head of the House Financial Services Committee, want the measure to include provisions that would limit the current pay as well as severance packages of executives at firms who sell their toxic securities to the government. Treasury officials have fought the move, though some limits on pay are likely to be included in the package in order to win enough support for it to pass. But how effective will they be? Not very, for the reasons outlined in this story on businessweek.com. Still, that won’t stop Congress from upping the ante. On CNBC early this afternoon, Frank said that the initial moves to limit pay and golden parachutes at firms which receive government help are only a first step. He said the current negotiations would also “lay the groundwork” for plans next year to place restrictions on executive pay on all US companies. In addition to the measures on the table now, he said Congress would also push to pass controversial “say-on-pay” measures which would give shareholders a vote on executive pay packages.

Reader Comments

sam

September 23, 2008 07:58 PM

This bailout will not work. The problem is much bigger than the proposed solution. The money will simply disappear into foreign accounts and the people who got it will be rolling on the floor, laughing at us for being such suckers.

Ben Richards

September 23, 2008 11:56 PM

I've said for a long long time that NO ONES "yes or no" is worth millions of dollars a year. Hire 20 very talented people for a small fraction and have a proper collaborative effort with proper checks and balances.

goulin

September 24, 2008 03:25 AM

The congress must take some action to stop these executives. There must be a condition in order to bail out these junky mortgage-related debt. The condition is to limit the salary pay and severance package to these executives who sell these toxic mortgage to government. In order for this bill pass, the congress must also eyes the election for themselves. The provision to limit pay and golden parachutes is only the first step. The current negotiations would also lay the groundwork for the plans next year to place restrictions on executive pay on all US companies. In addition to the measures on the tables now, the Congress would also push to pass the controversial say on pay measures which would give the shareholders a vote on executive pay packages. I also wonder why these top executives are getting paid so much. What contributions have they made to the companies? If the company is well managed and perform well, then they deserve that amount of money. If they only do a messy job and could not manage the company, not only should they get paid, they also should be punished by being sentenced in prison. The top position is a opportunity for serving the country and its people just like a public servent instead of a priviledged. Many executives have different opinions about the ownership of the property. They think they have the company and it is them who pays their employees. This is not the right perception. The company is owned by the shareholders and the CEO is just another employee hired by the board of directors. They should also share some responsibility for the job. If they do well, of courese they should be awarded by a huge cash stimulus and I would say there might not be any objections. If they mess up the company, they aslo should get fired.

Chief

September 24, 2008 07:06 AM

I do think that limits need to be put on executive pay. Many are way overpaid. They need to sacrifice like the rest of us when there is an economic downturn. No executive deserves $5 million when his/her company is laying off some of its employees. That exec ought to sell their $500,000 home and move into a 100,000 similar to what the rest of us live in. Some are greedy and simply don't care about the average person and some execs think they are better than everyone else. They are wrong.

Nguyen

September 24, 2008 09:30 AM

I think Sam is right. It won't work out. The $700 billion will go to CEOs' pockets. I will fire those who draft and prove the deal if it turns out worthless. These people have to include the provision of "I will step down if the package cannot rescue the market". Who will be responsible for dumping the tax payers’ cash into the ocean?

Frank

September 24, 2008 10:04 AM

This bailout treats the symptom not the desease. The housing market will not stop collapsing with this bills passage. Taxpayers will be left with a bigger bill as the securities that are purchase drop in value with the colateral supporting them (houses). This money will go to the share holders and bond holders of the companies whose junk we by at a premium.

BlackBean

September 24, 2008 10:12 AM

The solutions to the problems in the article about executive pay is simple. Simply do not release any money to these execs if they do not want to renegotiate their contracts. Go to court and stretch the proceedings out for many years. Eventually they will get tired of waiting and rightfully renegotiate. If they have any kind of conscience, they will renegotiate. Or if they don't want to renegotiate, don't bail them out. Make it part of the bail out requirements. You get bailed out if you are willing to renegotiate your compensation.

Debbi

September 24, 2008 02:12 PM

I can understand taking pay and golden parachutes away from company executives whose compamies fail if the gov't is involved , but to limit in private industry is WRONG!

The democrats are truly trying to make this a socalist country.

Sandra S

September 24, 2008 03:11 PM

I say, let the economy tank and start over from scratch. Let's see what that looks like. The chicken little sh--ts say the sky is falling. I say the sky has already fallen, so what the hell. And as far as foreign accounts, any parasite that steals American money to hide offshore should lose all his assets in this country. Want to play hardball, fine, let's do it.

Alice Dorman

September 24, 2008 03:42 PM

Fraud charges should be leveled at all CEO`s concerned in this mess. No Bail Out.

Alice Dorman

September 24, 2008 03:45 PM

I will not vote for Obama. Our country will never be the same if he is elected, he is a shady character that hates whites, Jews and the American Constitution.

Kalixt

February 3, 2009 11:28 AM

Debbie:
Private Industry stops being private when they need government money to function.

Thank you for your interest. This blog is no longer active.

 

Election 2008

Washington Bureau Chief Jane Sasseen and other BusinessWeek writers cover the run-up to the Nov. 4 presidential election, paying close attention to how the candidates will handle issues such as housing, the economy, unemployment, and immigration.

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