$500,000 pay limit has many loopholes
As I said at the conclusion of today’s column, corporate types are already busy exploring the loopholes in President Barack Obama’s $500,000 pay limit for bailed-out executives.
The column mentions one loophole: The limit does not apply to restricted stock. In theory, by piling on the free shares, a company could still pay its CEO more after a bailout than before. A story in today’s Wall Street Journal points out other loopholes:
- An executive can be removed as an officer of the parent company and moved into a subsidiary that isn’t subject to the limits.
- Executives’ existing stock options, which presumably are underwater, can be repriced to make them more lucrative.
- What is taken away in salary can be put into a new deferred-compensation or pension arrangement.
The Journal story also says the pay ceiling may have unintended consequences throughout corporate America. Jesse Brill, chairman of ComensationStandards.com, is quoted as saying:
I am fearful that companies will look at this as an opportunity to grant more restricted shares and stock options to executives who already have an abundant amount of equity.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
“I am fearful that companies will look at this as an opportunity to grant more restricted shares and stock options to executives who already have an abundant amount of equity.”
I hope they give these executives 110% equity in these companies that have been destroyed by THEIR OWN BAD WORK!
I have yet to hear one legitimate bad thing about limiting the pay of executives that have demolished a company to the point of needing government money. Those executive should just be happy they don’t have to give some of their past salary back…
another commie government taking over the USA, This is going to be a bad few years. This means that the ex. senators and such that made their money paid for by the tax payer should be limited to the same standards. George
Aside from the fact that limiting the pay is unconstitutional, this is just more smoke and mirrors coming from our government trying to show they are watching out for the little guy.
STLMojo - most companies have not been “destroyed” by their CEOs. Most are merely a victim of the economic downturn like the rest of us.
As a point of history, it should be noted that every major attempt by the government to bring transparency to CEO pay and to cap CEO pay has led to an INCREASE in CEO compensation. This is yet another example of how government interference often leads to completely opposite results from what is desired.
This rule by Obama is nothing but a PR grab for headlines. It solves nothing as it relates to the economy and will only backfire in the long run. It will be interesting to see how the P-D covers what happens in the future from St. Barack’s tinkering…
Bailout 2008, a poem by David Jeffrey:
Like a bloodied warrior,
laying broken and torn.
Like a dying soldier, hopeless and forlorn.
But the blood, it be green,
the color of money.
And the soldier is an economy,
and it is anything but funny.
Broken are it’s people and shattered are their dreams.
Thanks to the ultra rich and their full proof schemes.
It is a tragedy with more pain to come.
Finance will be Hell, and their wills will be done.
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