Obama’s cap on CEO pay strives to end era of excess
The new rules, which limit top executive pay at bailed-out firms to $500,000, may mark a turning point in pay practices.
By Mark Trumbull | Staff writer of The Christian Science Monitor/ February 4, 2009 edition
Reporter Mark Trumbull talks with CSMonitor.com's Pat Murphy about the Obama administration's directive to cap executive compensation at financial firms receiving future government help.
Reporter Mark Trumbull
The new pay cap for some of America’s top bankers is rooted in the short-term exigencies of a government bailout, but it also may signal a turning point that affects executive pay for years to come.
On Wednesday, President Obama put a $500,000 limit on annual pay of bank executives whose firms receive government assistance during the financial crisis.
But he also said the new guidelines are “only the beginning of a long-term effort” to realign the way business leaders are paid, beyond the banking industry and other firms getting bailouts.
The announcement comes at a time of public anger about the meltdown of a once-strong financial industry, and as the Obama administration is about to unveil additional bank-rescue plans that are likely to cost taxpayers more than the $700 billion already allocated by Congress.
It also comes as many investors and financial executives say that reformed pay practices need to be part of any long-term solution for the industry’s problems.
“There is a serious problem with compensation [in the financial sector],” says Charles Elson, director of the University of Delaware’s Center for Corporate Governance. Top bankers “convinced the world that they were the smartest human beings on the face of the earth…. It turns out they weren’t all that smart.”
The financial sector has moved to the forefront of the long-simmering national debate over executive compensation, largely because it is receiving the greatest government assistance. But what happens in that industry could set trends that will affect others.
The big question now may not be whether executive pay practices will change, but how.
Mr. Elson, echoing the view of many experts on corporate governance, says the best way forward is for corporate boards of directors to take the lead, rather than having the matter legislated by Washington.
“The quick populist fix sounds great, looks nice on television,” he says. But “the solution is better boards.”
Obama’s pay rules focus on any firms that seek and receive future help from government, with a firm cap on those getting “exceptional” assistance. Citigroup and Bank of America among the few examples of firms so far that have received targeted support that would cross the threshold to be called “exceptional.” But the new rules will not be applied retroactively. [Editor’s note: The original version did not make clear that the pay caps only applied to future help.]
“This is America. We don’t disparage wealth. And we believe that success should be rewarded,” Obama said. “But what gets people upset – and rightfully so – are executives being rewarded for failure. Especially when those rewards are subsidized by US taxpayers.”
Finance-industry analysts say it’s possible that, as the government rescue of the banking industry proceeds, the cap on compensation could mean sharp pay cuts for executives of some of the largest banks. [Editor’s note: The original version implied that the cuts were retroactive.]
“If these executives receive any additional compensation, it will come in the form of stock that can’t be paid up until taxpayers are paid back for their assistance,” Obama said.
Recent news reports that the industry paid out large bonuses at the end of 2008 stirred a furor in Congress and among voters who aren’t happy about the initial $700 billion cost of the financial rescues.
In that sense, Obama’s move reflects “a tiny fraction … of the public outrage at the completely irresponsible behavior of Wall Street,” says Nell Minow of the Corporate Library, which tracks executive pay and corporate governance. The guidelines “have been forced on Obama by the business community…. They’ve left him no alternative,” she says.
She says the best way forward is for corporations to strengthen their own boards, including with rules that require directors to get a majority of all votes cast at annual meetings. But whether significant change comes through private-sector or government action, Ms. Minow predicts that it is coming.
Tighter pay standards could include greater use of “clawback” provisions that require compensation to be returned by executives if corporate performance deteriorates.
The changes could begin and go furthest in the financial sector, which has been a trendsetter in recent years as executive pay has soared.
That is not just because of the Obama guidelines, but also because the lawmakers and regulators will probably have an eye on compensation when they consider how to reform regulation of the industry.
Some finance experts say that pay practices helped to set the stage for the wave of risky lending that now burdens the US economy.
“The most powerful market force of all is compensation,” Eugene Ludwig, the CEO of Promontory Financial Group, told Congress last fall.
“I would urge that [bank] supervisors, as well as companies, align compensation with safe, sound, and compliant behaviors, with a particular emphasis on the long-term well-being of the financial concern, as opposed to short-term benefits to the individual,” he said.
In the near term, the pay cap may give Obama some political cover to seek more rescue funds – measures aimed at making sure credit keeps flowing even as banks face big losses on bad loans.
“They know that they need this politically, to go to Congress and ask for a trillion dollars,” or whatever the tally may be, says Desmond Lachman, a finance expert at the conservative American Enterprise Institute in Washington.
Tight regulation of pay often brings unintended consequences, however. In this case, Elson says, it could prompt some talented bankers to leave their posts just when their expertise is most needed.
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Comments
2. Kathleen Haugen | 02.04.09
What happened to ethics and morality in the business world? Shouldn’t so-called “talented bankers” feel compelled to weather the storm which has been brought on during their reign? Or, are they not so talented after all?
3. Doug Jerdee | 02.04.09
I believe the problem centers around companies that have become too large and are ‘to big to fail’. It is time for anti-trust regulators to break up these banks. It would be more difficult for a chairman to receive outrageous pay if the company that they controlled was smaller.
4. fiendish avatar | 02.04.09
Soooooooocialism!
Just kidding.
I’m glad that my tax dollars won’t be paying for extra frills on failure-tarnished brass. Now if we could only get these financial institutions to disclose what they’re using MY money for…
5. Amos | 02.04.09
I realise that as I am not among the super-rich, my viewpoint may be “compromised” by relative poverty. However, if a talented banker was to leave a position of importance where their talents are needed, simply because they are restricted to a mere half-million dollars of annual payroll income… I call that weak, pathetic, and greedy, not to mention monstrously selfish. No human being actually NEEDS more income than that. It is fallacious to think otherwise.
6. J. McPherson | 02.04.09
It is a sad day when our self-worth is based upon a title and not upon the quality of our performance. No employee or executive is indispensable, why do we allow irrational fear to be our greatest motivator.
7. John | 02.04.09
Seems like the likely impact of the pay caps is that companies will stop asking for bailout funds - which is the only time these restrictions apply. But that’s ok by me.
9. chris | 02.04.09
This is the nature of government bailouts. It leads to more government control and less freedom, even if that were not the intent of the bailout (which I highly doubt). If government would have kept their noses out of the free market and let the banks fail, we would would have suffered a little, but not nearly as much as this unbridled propping up of bad debt will cause. We are just delaying the inevitable and making the end result worse with each new printed dollar.
11. Camilla | 02.04.09
You state “The cap on compensation marks a sharp pay cut for executives of some of the largest banks, such as Citigroup and Bank of America.” This is incorrect. The cap is not retroactive and there is no reason to think it will apply to Citigroup and Bank of America, unless they apply for “exceptional aid” (whatever that means) in the future.
13. Steve | 02.04.09
Obama needs to understand that some executives are paid for performance and that is what that compensation was for, for a lot of those executives. The overall performance is the responsibility of CEO’s and CFO’s they should have their pay reduced. In fact, they should all be removed and NOT considered top talent.
14. Singing Bowl | 02.04.09
This might give them hard time to recruit the smartest people in the industry. The point is not to curtail salary. If that’s the problem, why won’t we set the cap to $100,000? We want ethical and smart people to run the company with more strict auditing process.
15. Tony | 02.04.09
Obama is a Communist. How can he dictate what anyone earns. I thought I lived in America. Is it now the Soviet Union?
17. Lynn M | 02.04.09
The same compensation cap should be set for executives of insurance companies. Perhaps then premiums can be lowered and more Americans can afford health insurance. The only real answer to the dismal state of healthcare in the US is a single payer system which eliminates the role of insurance companies entirely but a compensation cap would be a step in the right direction.
19. Offsuit | 02.04.09
If there were any justice in the world at all, every bank CEO in the country, many of whom run profitable banks that were not taken to the cleaners by the sub-prime crisis (a crisis which was itself created by government interference in the economy), but nevertheless were FORCED to take TARP money, would resign, en masse, immediately. Let Obama and the thugs in Congress try to figure out how to run the financial system of the country without their help. Inside of a month, the economy would be irreversibly destroyed, and the pathetic anti-capitalist philosophy that motives insane policies like this would be forever discredited. Then the country could get on with the job of actually trying to recover from the financial insanity that decades of government policies like this one has caused.
20. Larry Wright | 02.04.09
You wanna talk about pay caps? Why does the President of Ohio State University make $1.3 million dollars? That’s outrageous!!! Obama wants to dictate to businesses what CEO pay should be. Fine, if they can’t manage their own businesses and want to suckle the Federal teat then they should be dictated to. But why doesn’t he look at State jobs like college university presidents? Why does a college president earn more than a President of the United States or a Senator, or…. ONE COLLEGE UNIVERSITY???
21. Steve | 02.04.09
It is obscene, immoral and just plain bad business for the typical executive to make 400 times as much annually as do other workers. It’s high time this corporate larceny ended and all executives are compensated reasonably. Both boards and executives should be held accountable and the decisions they make should be made in plain view of employees and shareholders.
22. dawn | 02.04.09
I am not sure that $500,000 is the right number, but I it is about time that CEOs gave other CEOs raises. The board members are almost always other CEOs, who approve each other’s pay - fox(es) guarding the hen house. PAY FOR PERFORMANCE.
Oh by the way, if the CEOs decide to leave because they do not like the pay - so what. 90% of the CEOs who led the financial market into this disaster are still on the job. If I failed this miserably in my job - I would be OUT of a job.
23. Chris | 02.04.09
They will still ask for bailouts because it means the end for many of these companies if they dont.
24. Taxpayer | 02.04.09
If we had ‘talented bankers’ we wouldnt be in this mess - and if we DID have them, then their recommendations werent being listened to obviously, even after the financial meltdown in Sept. until now. So why should we think that retaining them with bonuses etc is going to make a difference now?
I think government intervention is the only thing that is going to stop these businesses from finding loopholes to spend taxpayer money frivilously again and again. Its not full-proof, but its better than trusting the company’s executives who’s bottom line goal is to make themselves richer. They will milk the cow until the last drop of milk is gone, you can be sure of that. Its what they do.
25. American Made | 02.04.09
After Taxes . . . .500k is about enough to pay for the property taxes, utilities and janitorial/maid/gardener services on some of those big homes they have. There is no way a top bank executive can live off of the 500K/year cap without completely changing the way they live.
Hope this works. I’d hate to have the one guy who knows the system leave just when you need him the most.
26. Tech Guy | 02.04.09
The problem is obvious, and not necessarily unique to the financial industry. There has been a profound compensation approach development over the last 20 years that has a practical hole in it. People began to believe (it was - of is - religion!) that a compensation program is all that is needed to manage people. Remarkably, Boards bagan to believe this. “If you want someone to do something, give them a comp plan”. Crazy! Compensation plans are a fine motivational reward system but, like I tell the managers that work for me, if I could construct the perfect comp plan, I wouldn’t need them - people would just always do the right thing and I’d fire all the managers. If you consider this conceptually, the point is that there is absolute responsibility starting with the Board and extending down through the organization. Compensation programs are not a free ticket to not do what’s right.
27. Michael | 02.04.09
All the smart execs are going to jump boat to companies that are not effected by the cap leaving these failed business to be run by idiots, great move government.
28. TJ | 02.04.09
If talented bankers want to leave than let them leave.
someone else will fill the void
29. realistTheorist | 02.04.09
Firstly, the government should not be giving tax-money to help these banks. Despite the public outcry when the original TARP was being debated, the government went ahead with it.
Secondly, they forced the TARP money on some banks — like Wells Fargo — who did not want to take it.
Having done these two wrongs, the government cannot now fix it with a third wrong: interfering in pay levels.
Each such act is another wedge that breaks into the principle of private contract, and individual rights.
30. Harry B | 02.04.09
What we saw in recent years was greed overtaking commonsense. How can one person make ‘hundreds of times’ more than a common worker? Such largesse can never be sustainable. Anyone, who thinks capping is wrong should wake up!
31. radiofreedenver | 02.04.09
It seems to me that resurrecting the federal tax code of the 1930’s, which discouraged excessive salaries via a combination of high marginal rates and limited deductions, is the only effective long term solution.
The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.
–John Kenneth Galbraith
32. Ryan | 02.04.09
Hmmm…. While I think some people like ceo’s and newscasters make way too much.
1. People will leave these companies and go to other companies that are not receiving bailouts. Chances are the companies receiving bailouts will fail.
2. I am sure there is a loop hole somewhere that we the public are not being told.
3. Why is everyone picking on the ceo’s what about all those companies like sprint, verizon, at&t, t-mobile, cbs, abc, nbc, fox whose excutives and newscasters make googles of money.
5. Our football players, baseball players and sports stars should make no more than 500,000 as they use publicly subsidized stadiums essentially a bailout for the teams.
6. Finally, Obama thinks he is transferring wealth as we know that ceos tend to be white males. However, transferring money and transferring wealth are two different things. Giving money to the poor is not really transferring wealth. It’s just giving them money to go spend. They accumulate no real wealth. Teaching people to make money and work jobs to buy houses, cars have a savings and pride is a better way to help people accumulate wealth.
7. May God bless american.. I think we need it
33. Lester | 02.04.09
Good article on the bank ceo’s.
I only hope they dig deeper into this nationwide ceo scam of their value and compensation plan.
The airlines after 9/11 took great advantage of the public and got billions in relief. Ceo’s forced workers to take paycuts or went to bankruptcy robbing billions in wages and pensions. Check United Airlines ceo bonus after filing bankrup. American Airlines is no angel either with their working together win together scam.The workers still have no contract since 2003.
In the mean time lining their own pockets year after year with record breaking bonuses.
Most of the middle class,or workers for these thiefs have recieved little if any raises since!
34. Ray B | 02.04.09
There should also be a cap on salaries for sports figures and movie celebrities. Wait a minute, that’s insane. How did the government get the authority to meddle in commercial affairs? I thought this was a free country. No more, thanks to Democrats.
35. Larry | 02.04.09
They lose millions of dollars and still receive bonuses for a job well done? Of course the system is busted. The boards are not effective because they are made up of members who receive the same idiotic treatment from their own boards. Why would they upset the apple cart?
Now if they would only do away with all business travel and entertainment tax deductions. Why do taxpayers have to subsidize travel or meals of business? As evidenced by the debacle of Daschle’s tax situation, the more you make, the less you pay for there are deductions and allowances that reduce the “net” income to a pittance. And that lovefest Wells Fargo was going to put on, eventually all those costs would have been passed off as a business tax deduction.
36. gary | 02.04.09
Corporate extravigane? they are taking the heat rite noe but how about our represenitaves and congresmen taking $93,000.00 each to spiff up there offices. How exactly does mthat do anything execpt stimulate there alreado overinflated ego’s
37. Tissa | 02.04.09
If these bankers were as talented as Mr. Elson seems to believe, their banks would not be asking for tax payers’ money right now. Let them leave. Let’s hire people with a different mindset: One that emphasizes less cleverness and more intelligence.
38. gary weeks | 02.04.09
Seems like their expertise created this problem. They want pay equal 36 year old baseball players that turn down $ 25 million/year whether they produce or not. Lots of misplaced values in our country.
39. Joram | 02.04.09
“Tight regulation of pay often brings unintended consequences, however. In this case, Elson says, it could prompt some talented bankers to leave their posts just when their expertise is most needed.” -
I am confused: if indeed they are experts, and because of their expertise the institution is not in need to ask for a bail-out, will the government still impose restrictions on their pay? On the contrary: where a firm asks for a bail-out, which, if approved, is accompanied by compensation restrictions, one may wonder whether the prospect of potentially losing these bankers is indeed ‘lost talent’…
40. Mario | 02.04.09
Yes I agree Success should be rewarded, but how much is enough? $1 million $2 million? The CEO of Bank of America made $23 MILLION! in 2008. What does 1 man need 23 million for? And at the same time he’s begging for the taxpayers, WE THE PEOPLE! for Billions more?? Because they gave loans away like Denny’s gave away free breakfast’s ? Why do bank gives loans? So they can make MONEY, and so they can get paid % on those loans. More loans = more %. Who cares if they pay the loan back, if they don’t, They just foreclose the mortgage and then start the cycle all over, after finding a sucker, I meant a lender, to “qualify” for a mortgage and get % and start the cycle all over. The problem the banks had, is they ran out of “suckers” Oh, but wait, now they got the “Treasury” as the new “Sucker”
Let’s not let this cycle continue! STOPGAP!! NOW!!
41. Troy V | 02.04.09
There is a democrat law of unintended consequences (I am thinking of starting to call it the “Obama law”). It is hard to argue some of these subjects as they sound sooooooooo good to the simple minded.
Example: Obama’s “Buy American” to stimulate the American economy resulted in all our allies threatening a Trade War if it were tied to the Stimulas package… so he backed down quickly
Where will this one end? I would guess that the Banks that need to best minds in the country to lead them out of trouble will now be outbid by the banks that are not in trouble. Thus - limiting pay = limiting talent = more trouble = more bailout money from govt.
It wont be long before the world is asking where the nice Cowboy went? (who’s only sin was to fight with a couple of small Muhammidist countries who were a thorn in everyones side anyway)
42. Duane | 02.04.09
The economic foundation of the United States was based on a free market with limited government intervention. For hundreds of years, the United States economy has grown based on this principal and despite ever increasing intervention by the Federal government. As intervention increases, there comes a time when we are no longer a free market economy but one that is centrally managed and planned - i.e., communism. There is not one centrally managed and planned economy in the world, with such a diverse population and interests as the United States, that works as efficiently as ours. In terms of healthcare, the Federal government already runs three of the worst healtchare systems areound - the military healthcare - the veterans healthcare - the bureau of indian affairs healthcare. All three, individually and collectively, are the worse healthcare systems and hospitals in the United States. Why would anyone perceive that the Mayo Clinic, MD Anderson, the Cleveland Clinic, John Hopkins, UCLA Medical Center, University of Nebraska Health, University of Michigan Health, and a whole host of others would be better run if taken over by the government? Before you propose a single government run system, go to an indian affairs hospital and see for yourself what a government run hospital does. In addition, for every one dollar paid into the Federal Medicare system, 67 cents (67%) goes to pushing paperwork at the Federal system and only 33 cents (33%) goes towards providing services to patients. That is how the Federal government manages a healthcare payor system. Before promoting a one payor Federal system, investigate on your own the poorly run Federal system.
43. james of colorado | 02.04.09
Aren’t our politicians also being rewarded for failure?
They(politicians) are as much to blame as anyone else in this mess.
Fannie and Freddie are GSE’s and therefore should have been REGULATED by the government. Where was Barney Frank for all of this? Barney and the rest are willing to point there fingers and blame everyone else.
When do the hearings begin to indict the politicians involved in this mess?
We need to quit blaming banks and auto execs for ALL of this mess and look at some other causes such as crooked/ greedy politicians and unions.
When is Pres. Obama going to chastise the bloated UAW?
44. ryan | 02.04.09
Why pick on the certian ceos, why not set salaries for all ceos of abc, cbs, nbc, fox, and others. In fact lets set salaries for sports stars like football players.
45. Shane | 02.04.09
When Congress created the initial $700,000,000,000.00 dollar bailout, you’d think that they were interested in protecting the tax payer interests, having terms of the initial bailout in place before they issued the initial funds, preventing the unreasonable bonuses, extravagant spending, and outrageous compensation packages that have already taken place at the expense of taxpayers. It appears that our congress is overpaid as well. Using the words of Charles Elson in this article, It turns out they weren’t all that smart. I propose they accept pay cuts as well including riding commercial jets in place of their personal jets and ride in green friendly automobiles that are produced by the US companies that we just bailed out.
46. Luke | 02.04.09
Great move by Obama. These bankers are employees of the banks, not the owners. They were hired by the owners to increase the value of the bank but instead they lost 90% of the value. Now they want a government handout. If the government is funding the bank they should make the same changes as anyone else putting money into a company would do - change the management and set new rules about how things will be done under the new management. It’s time these bankers faced the consequences of their horrible performance the same way any other employee would.
47. Mark | 02.04.09
Heh $500k imho is too much money. Most people make nowhere near that. Actually I read somewhere last month about I think 70% of americans make under 38k a year. how is $500k fair? I’d say take a look at their lifestyle and limit it somewhere. none of my family members make more than 250k in a year and they are all doing very well.
48. John Vanorsdale | 02.04.09
I agree with restrictions on any money the government gives someone, but I worry about the long term effect. Every time the people give the government the ability to control something, it seems to never be satisfied. I dread the day this country loses its capitalists ideals and government tells a company how much it is allowed to make and pay people.
49. george wade | 02.04.09
I believe for the first time President Obama is on the right track. I don`t think that the bail out will help the situation. I have seen bad days in my life but it has always been that you tightened up and took care of the problem yourself. Today failure seems to be rewarded, I always thought you had to earn your pay. This is the last time according to God`s word, which is truth: if our leaders could see this then would there be a different approach to the issues that are at hand
50. Brian | 02.04.09
I have no problem with capping executive pay for companies that have received government (taxpayer) bailouts however the suggestion that the government should get involved (or cap) compensation of other publically held or privately held companies is absolutely un-American. Although some of the salary/benefit packages these execs receive seem rediculous, the government has no business in those matters. The company boards should make those decisions not the government. If people don’t like it, they can take their business elsewhere. What’s next - should the governement cap the pay of professional athletes or coaches? Should they cap how much an actor/actress makes for one movie? How about capping how much an author can make for selling a book? This idea is a slippery slope that this country doesn’t need to get on.
51. Don | 02.04.09
Props to Obama for making this happen. What concerns me though is hopefully this doesn’t extend as a blanket solution for other businesses that are profitable, as this could pave a road that I wouldn’t want to see us head towards…
53. Deborah Gold | 02.04.09
Can you hear the words coming out of Barack’s mouth? What part of “cash compensation” don’t you understand? Most CEO (CFO,Cxx…) compensation is from stock options. That way they only pay capital gain (not income) taxes. Nothing about limiting “cash compensation” places any limitation on stock options. Economics must be complicated to “you people”.
54. Lady M | 02.04.09
Well, well just another step toward the government deciding how much we can earn! They will first apply this to companies asking for money, then states and cities, then colleges, then “Mom & Pop” operations etc.and PRESTO - pretty soon EVERYONE will make the same. Does this sound vaguely like socialism? BHO is so angry at Wall Street - what about the automobile union members who refuse to give up anything yet want more and more government money? Oh, that’s right the UAW gave how much to his campagin? This is just good PR - makes BHO look so righteous and the thing the media is not reporting is that none of this applies NOW - just to future loser companies who mismanage their funds etc.
55. Jim | 02.04.09
Maybe the companies can also try taking a lead in taking the excesses no longer going to bonuses due to the caps back into funding the employees health care, retirement or other benefits. Instead of complaining about having to meet or make these expenses and how they cut into profit margins use the bloated bonuses to pay them.
56. JO | 02.04.09
Those Banks were public companies. The executives were hired by the board of directors, and the board is voted on by shareholders.
This should be a wakeup call for the members of boards of directors. They are the ones setting compensation. This kind of excess not only hurts the public, it is giving a raw deal to shareholders.
57. ASIT KUMAR SEN | 02.04.09
THERE WILL SURELY BE VIOLATIONS TO THE RULES OF EXECUTIVE PAY, THE ONLY WAY TO PLUG THAT LOOPHOLE IS TO PUBLICISE A RELEVANT SET OF EXEMPLARY PUNISHMENTS
WHICH SHOULD INCLUDE A MANDATORY JAIL TERM.bACKUP LEGISLATION ON EXECUTIVE PAY IS A MUST. iF THE SMARTEST AND THE BRIGHTEST THEN LEAVE THE FIELD, BANKS AS WELL AS INSURANCE COS.WOULD HAVE TO FIND SECOND RATE TALENT TO MANAGE THEIR
BUSINESS.aFTER ALL, WITH THE SMARTEST AND THE BRIGHTEST IVY LEAGUE PRODUCTS LEAVING IF THEY MUST,,WE,WHO SAW THEIR PENSION FUND AND SAVINGS LITERALLY EVAPORATE,WOULD SING A GOOD RIDDANCE SONG.
58. Jeff | 02.04.09
The only real problem the U.S. faces w/ regard to healthcare is that not everything is available to everyone. The dilemna we face is that while the U.S. is on the forefront of about 90% of the cutting edge medical advances in the world. However, that all takes money for the research and develoment. Now where does that money come from? The more you look at the problem, the bigger it gets and you start to realize why healthcare reform is so difficult. While a single payer system may seem good, the problems will still be the same. There still has to be a list of benefits of what is covered and not. Unfortunately, there will still be those who need or want a non-covered procedure and stuck w/ having to pay for it. Healthcare in the U.S. my not be perfect, but it still is the best as far as quality, technology, and consumer(patient) protection. There are other countries where medical care is cheap or free to everyone, but quality and patient rights suffer on a scale which is difficult to measure. Anyway, I also think that insurance companies are evil, but private insurance reimbursements are what keeps many healtcare providers in business b/c it balances out the losses that take from medicaid and medicare reimbursements. I think that another huge problem is that today’s physicians come out of school w/ debt in the hundreds of thousands, but earn less that a member of the UAW. That is just wrong, considering that these young men an women are in charge of the health of our nation, and are held legally responsible for their work. The problem is so deep and complex it is nearly impossible to reform especailly in this very hard economic times. Lynn just makes healthcare reform sound so simple, but really its far from it. It’s just if President Obama is not able to “reform” healtcare, I wouldn’t consider it a failure.
59. Sara | 02.04.09
Hopefully this is only the beginning, and Obama has plans for stronger oversight of bailout funds and how they are used (not likely). These institutions have received massive amounts of federal money, and until this point have had no government oversight as to how to use the money! Of course, this first step is hardly any oversight, but it is a start. These companies are still handling funds irresponsibly (IE buying corporate jets with bailout money). Why should any control be given to the companies that dragged Americans down to this point? They didn’t (and clearly still don’t) care about the general public, only about keeping their multi-million dollar homes and cars and jets and boats…
60. Arthur LEMAY | 02.04.09
Are we supposed to be happy to learn the Government wants to control the compensation of all companies, not just Banks, and not only those getting Government bail-out funds?
This is not nice and a lot of the companies are being run by their founders who had the foresight and the risk-taking mentality to risk their time and their money to start businesses. Are they to be controlled too?
And, where will it stop? The Government might also decide that an office worker is “worth” as much as a worker with a difficult job like an electrical lineman? If so, who will do difficult jobs? How can managers recognize hard work and ability?
This is the camel’s nose under the tent, and it bodes ill for every enterprise. If the Government controls compensation who will want to work hard?
This is a terrible development.
61. Willliam Giesenhagen | 02.04.09
I agree that the greed in CEO saleries is excessive. It seems that the upward sprial has been caused by what their peers are makeing and the boards go along with it rather than what the CEO’s have produced. However, the government mismanages our money much worse than the CEO’s do. We are just jumping out of the pot into the fire that leads us much faster toward complete socialisation.
62. Anon | 02.04.09
Finally! We could have done this eight years ago!
Lets all be grateful that somewhere in Texas, a village has got its idiot back.
63. Ted | 02.04.09
While it should go without saying that even a legitimate President’s “ordered” $500,000 pay cap is an unenforceable intrusion into the private sector, as if that weren’t enough, Obama LACKS EVEN OSTENSIBLE AUTHORITY to issue the order UNTIL HE OVERCOMES “RES IPSA LOQUITUR” BY SUPPLYING HIS LONG FORM BIRTH CERTIFICATE AND PROVING HIS ELIGIBILITY TO BE PRESIDENT UNDER ARTICLE 2 OF THE US CONSTITUTION.
64. American Made | 02.04.09
If the bank brains are really all that smart, then maybe they can save their golden egg laying goose before she really croaks. Their bottom line figures have to include better leadership. In that regard, the Obama charisma can only do so much.
65. Tom Jump | 02.04.09
I see we foregot that this is the land of the free. I am proud that a C.E.O. can make a good salary and becomes well paid for making a bank or company a profit. Our 401k’s are there to help us pass the age of 66 I am all for it. But if they are losing us our future then they need to be fired and put out to pasture with all the failed excetives for the auto industry.
66. iremember | 02.04.09
Executives that lose as much money as these people need to be fired immediately first and then blacklisted against ever running a public American company again. If they bellyache about how they cannot survive on $500,000. a year then they can go to hell as well. The nonsense about losing so-called talent at top management positions is absurd on its face. If this is the talent then they should have never had the job in the first place. It’s going to be many years before the American taxpayer will be able to undo the damage these morons
have brought on the country. In Japan they would commit Hari-Kari and we would be done with them.
67. KansasGirl | 02.04.09
This is absolutely no business of any government. This man is starting to sound like Chavez. I will not blindly accept this tyranny.
68. mare | 02.04.09
The bankers “who are most needed” might leave? To go where with equivalent pay?
Get real. No one needs 5 million a year plus bonuses of my money. That whole idea of “fast track and 100 hour weeks” is just unacceptable. TELL me there aren’t at least 2 people waiting in the wings for these jobs. And the current job holders have done so well? (for themselves, yes)
69. Sara | 02.04.09
These plans are for future bailout recipients, but what about the companies that have already received bailout funds? They are still free to handle the money as irresponsibly as they have been, it appears, without any oversight as to how the federal money is spent.
70. KansasGirl | 02.04.09
To all the people applauding this, I ask one question. How exactly is this going to improve your lives?
71. paul chima. onitsha | 02.04.09
this is really funny. how can someone get paid for destroying the future of a blessed generation. they must pay now!
72. Kathy | 02.04.09
I can see putting caps on salaries when companies get funds from the government but the situation does make me nervous. This country seems to be running on envy and I do believe that there are many that would applaud caps on salaries period-as long as those salaries were higher than theirs.
74. BeYouMe | 02.04.09
The Gov’t will control the BANKS,then the PEOPLE.
USSCA (United States of Socialist Communist America)
75. BeYouMe | 02.04.09
I cannot believe you people are willing to accept this foolishness of the government telling private / public companies what they should pay their CEO’s, next the will impose this on the citizens. I guess the actors, musicians, sports athletes, etc will also have to follow suit. We will slowly become a Socialist and or communist nation. Those banks should have never took that money, I was personally against the bailouts.
76. James Corbin | 02.04.09
If this wasn’t a condition of the money being loaned, it is a bit late to start writing rules after the fact. Secondly, if a CEO has a contract with a company for a certain compensation, isn’t that still legally binding? Thirdly, the President makes $400,000 and gets at least $150,000 each and every year after retiring after only 4 years of work. How about giving some back, President Obama? After all, what do you really need all that money for anyway? Virtually everything is provided to you free of charge while you’re in the White House! How about putting some of that change back in the Treasury? Stop throwing rocks out of your glass house!
77. JAB | 02.04.09
That financial excess exists for Senators and members of the House too. They have high salaries, secure homes (sometimes several), one of the best health care plans in the nation which goes with them when the leave, and excellent retirement. No wonder it is hard for them to understand how much ordinary people are hurting in a time when as many as 100,000 people are being laid off daily and people are losing homes, health care and retirement.
Tonight on TV I heard John McCain talking about how the stimulus plan was nothing but pork. That was easy for him to say. I couldn’t help but think about how rich he is, how privileged he is as a member of the Senate, and how easy it is for him to trash help for the middle class. It is sort of like President Bush vetoing the SCHIPP bill. It’s easy to veto health care for children when your children have the best and always have had.
I’m sorry, but I am really sad that the rich politicians don’t understand how much pain there is out here. I thank God that Barack Obama and some congress people do understand.
78. Eric | 02.04.09
The free-market demands competition. Capping salaries will inhibit the drive for some very smart people. Given the circumstances, Obama’s measure seems reasonable. I am remaining skeptical, but optimistic.
79. DABIGRAGU | 02.04.09
Answer this; why do we have so many members in Congress, who have done a horrible job yet are still employed?
So now we have the government dictating pay? I understand the outrage of a CEO of a failed bank earning 26mil in pay and bonuses, but and I repeat; Now we have government dictating pay?
80. Dan | 02.04.09
With or without tax payer money I cannot even comprehend justification for one individual earning over $500,000. It’s not a coincidence that folks earning that kind of money work in finance…
81. Kathy | 02.05.09
President Obama makes $400,000. I don’t seen why any CEO asking taxpayers to help pay his salary should have the right to ask these taxpayers to give him more than they give Obama. And any bonuses received last year should be deducted from the pay they’ll receive this year. Any bonuses earne should go back to paying back the taxpayers–the ones that can’t deduct their lunches or go on business trips to Hawaii.
82. Paul | 02.05.09
One amazing thing I heard yesterday on BBC Radio 2 was a caller who claims to know a very high placed official at Nomura. He said he was having dinner with this official and asked him what caused all of the current financial mess. The reply? The official said he really had no idea how it came about and got so bad! If I had money in Nomura, I would grab my money and run, screaming, away from that place!
83. HippyLover | 02.05.09
While we’re going after ridiculous compensation… what about Hollywood Celebrities, and Athletes?
If “everyone” must make sacrifices, then why must the ramped wealth of people who don’t directly contribute to the health and welfare of the United States have to do their part?
Imagine if Hollywood Celebrities had their income capped at $500,000 a year. I think anyone in the middle class would love to make that much for showing up to work to act like someone else…
Gimme a break. Actors and Athletes are not farmers, firemen, or teachers. They provide virtually NO real value to society other than entertainment. A temporary salary cap on them makes perfect sense…
84. Charles LeBlanc | 02.05.09
There is no need for anyone to make more then $500K a year, including CEOs of every stripe, lawyers, doctors, and even entertainers. Income beyond 500,000 is merely greed and should not tolerated. Excess income (beyond $500K) should go to support our poor and underprivileged. Poverty is the number one problem for America.
85. Kathy | 02.05.09
Envy and downright jealousy-that’s what I’m seeing all over the internet these days. So when is 200,000 too much and then 100,000-so on and so on. Does it only stop when it reaches your salary?
86. norma | 02.05.09
So Obama makes $400,00 per year? Does his compensation include the “perks” of other CEOs? Rent-free house, servants, limousine and driver, private jet etc., AND a golden umbrella when he leaves by way of millions for books he will write and talks he will give, et al. A cap on the CEO of USA? Why not ? There is a saying “Do not ask of another what you are unwilling to do yourself.”
87. Will | 02.05.09
If a corporation wants to fire one of the unsuccessful executives, how are they going to attract a great replacement with a limited amount of pay available. This will only hurt the companies who have received the bailout money.
88. John Smith | 02.05.09
$500K
Is definitely less than cash break-even for an executive in Manhattan with a family to feed and educate. Unlike Kansas, tuition for kindergarten is $25 to $30K, per kid. Its all relative people!
89. Glenn Lego | 02.05.09
Good deal! Any one who can’t live on $500,000 by the year has a real problem. They should try living on $50,000 or less like many of the rest
of us. Don’t think we’ll see too many limos parked in front of the welfare office!
90. LEE JENKINSON | 02.05.09
“Tight regulation of pay often brings unintended consequences, however. In this case, Elson says, it could prompt some talented bankers to leave their posts just when their expertise is most needed”.
Excuse me? You mean the smooth talking “expertise” that put us into a global recession? If they don’t want to work for a “paltry” 500k then go get a “real” job for 40k a year, maybe move to India, or just live on the millions you were handed from your buddies on the board of directors. There are plenty of others who would jump at the chance to pull in 500k that may actually have some moral integrity.
And the previous writer was right, there is NO difference between Big government and Big business.
91. JaHa | 02.05.09
83. HippyLover | 02.05.09
While we’re going after ridiculous compensation… what about Hollywood Celebrities, and Athletes?
———————————————————————
What about them? How does that have any benefit to the taxpayer? You want to see celebrities and athletes salaries capped? Then stop spending money on movies and sporting events.
Now, back to this CEO salary capping non-sense. First of all, this debate shouldn’t even be occurring as the Federal Government should not be handing over taxpayer money to for-profit corporations to begin with. Let them fail if that is to be their fate.
Secondly, the capping provisions were added simply to make this theft of taxpayer money more palpable to the masses. Nothing but show. The caps will be skirted, this I can guarantee you. These CEOs will still receive exorbitant compensation in forms other than cash. In fact, they stand to make an absolute killing on their stock options. Low stock prices equates to more shares for them in their options. You and I will fund the rebounding of those stock prices, and they will reap enormous rewards.
Only a fool would appreciate the incorporation these “caps.” Would you think it a step in the right direction if the FedGov sanctioned the picking of your pockets so long as the theif only gets to keep a portion of the money? Pure insanity. America has lost it’s collective mind, along with it’s backbone. We The People have become so feeble that we will accept being stabbed in the back by a traitorous body of “representatives” so long as the knife is a wee bit smaller.
92. Kathy | 02.05.09
It’s all relative and always has been. Tell some Mexican illegal working here that you just can’t make it on 50,000 and he’ll laugh his socks off. He can turn around and tell some guy in Kenya that he’s having a heck of a time making it on 20,000. What I really get a charge out of is those that say “well, it can’t get any worse” or better yet “we’re in our darkest hour”. Not quite and those that believe it really need to read more history. We are in definite trouble which is why this stimulus package needs to actually stimulate the economy and not just pacify those that are angry because there are plenty that have more than them. Americans need to work and the way I see it, if evil corporations are punished jobs will be lost. If small businesses are punished, jobs will be lost. Americans have to grow up and realize that there will always be people with more than them just as there will always be people with less.
93. Don Griffith | 02.06.09
I think the president’s direction in reducing outlandish salaries “at the top” is commendable, timely, and certainly appropriate.
If there is a study that shows the collective amount of CEO salaries in the USA plus the added benefits attached (stock options, housing, bonuses, transportation, insurance, etc), I would like the Monitor to publish these figures (perhaps gross salary shown and then “perks” shown beside that with the total compensation given top executives as well). Another factor is that not just CEOs but a huge number of top executives receive well above $500,000 annually. Will they be included in this cap? E.g. The football head coach at the University of Georgia earns (just in salary with no perks factored in) hundreds of thousands of dollars more than the president of UGA.
I am not sure how the overall salaries CEOs receive compares to other costs (such as the bailout figure the taxpayers are footing). It would be good if we had such a comparison.
However . . .
$500,000 sounds like a tremendous amount to the average wage earner who receives less than one tenth of this amount annually, but for an individual to go from a salary of millions per year to a mere $500,000 might be untenable and consequently cause a huge and unexpected migration from top positions to other pursuits. A comparison would be for the average worker to reduce his/her salary to a fraction of what he/she is currently earning. Few professional athletes would be able to sustain such a salary cut given their expectations and life styles.
94. RJ | 02.12.09
If I were a “TOP” executive and shareholders were stupid enough to allow me to drive their company into the ground and then still give me millions in bonus money, why wouldn’t I take it?
95. Nomis | 02.17.09
corporate and ceo’s are the reason why this economy was messed up in this first place, auto companys have the nerve to ask for bailouts but then why are the employees still being layed off? ceo’s dont do a damn thing to help society or the american people, they only love to help out the rich not the middle class, and stupid ass corporate always wanting to make 5% more than what they did last year, no wonder the economy’s fucked up, all this technology we have are being priced at a ridicolous price that’s not even worth it’s value, i work at best buy and i always let customers know whats necessary and whats not necessary. food and family come first, we dont need this stupid rock band bullshit or bluetooth or gps, if we didnt need it in the 1900’s why do we need it now, some americans are stupid to hate a man like obama, he is a great man, and it utterly is upsetting at the fact that before he became president two attempts were to assassinate him, if anybody should be assassinated it’s greedy selfish peeople in business suits and bluetooths who work for corporate or ceo’s, why dont they assassinate them, there the ones fucking us up, some people are just stupid i guess, no common sense whatsoever, common sense is needed not a stupid fuckin masters degree to get oyur way through life.
96. Jerry | 02.21.09
All CEO’s are being compensated at a much higher level then what is warranted. It is directly related to the high cost of all products, health care included. I personally feel that a $500,000.00 cap is too high, especially when most of the employees that work for these people are only paid between $25,000 and $75.000.00 a year. There won’t be a problem finding people to fill these positions if all companies cap thier CEO salaries.
It will also bring forward candidates for these positions who are interested in doing what is best for the company, and financial welfare of the community, rather then just being interested in these positions just for the pay they will recieve. To President Obama, Thank you. Ride the CEO’s hard. They all need it.
97. John | 03.18.09
The USSA further rewards the unmotivated and make scapegoats out of the evil capitalist. Like those overpaid gluttons at Google who make what were doing now possible. One needs only fool most of the people some of the time in the name of solving a national crisis for the good of the country. Hitler needed scapegoats in 1933, and Obama needs scapegoats in 2009. He, He, He, everything is going according to Obama’s plan. Now, let’s see, what about the chant to stir up frenzy? Heil Obama, no,no, doesn’t rhyme, Oh Obama, that’s better.
98. kaa | 03.21.09
Okay - communism is here….peopel should mind their own business.
If someone wants to make 500,000 or 1,000, 000 or more then good for them.
This just jealousy on the part of the people that want to limit pay. If you want the big salaries then work hard.
Government has no business putting limits on pay. This is an assualt on private property. Communism has arrived on our shores. Sad day ..
99. Lisa | 04.20.09
Jealousy? The fact of the matter is that these salaries only reflect our reliance upon unethical economic ideals. That money must be equated with violence and inequality. People are toiling for nothing so that CEO’s can rake it in. The pay-scale needs to be equitable. Time for a revolution. It’s already happening. Boycotts of these businesses that don’t set limits on CEO pay or demonstrate responsible practices are already happening.
MBA’s need to be educated in ethical business practice. They need a liberal education, which business is NOT. It all starts there. Incidentally, I have two business men in my family, raking it in. It doesn’t change my opinion. They make a disproportionate amount of money to the work they do. If you look at how that money is made from top to bottom, and the offshore investments and labor, it’s no different than the United Fruit company.
100. Singing Bowl | 04.25.09
I really just don’t understand why we are doing this. I guess in fairness if I were to take a bailout I would expect a salary cap.
101. Alan Wood | 04.30.09
You can bet if a worker was paid more than the global norm there will be a move to knock them down to the least common denominator. With some Unions this has been refered to as the rush to the bottom.
102. Matthew | 06.11.09
This is stupid the government has no right to tell any one how much they can make.
103. Matthew | 06.11.09
Oh, sorry this is just for bailed out companies ha I can’t read 
good I hope all the bail out companies go under!
104. Jorge L Rodriguez | 09.18.09
For a long time now, I have felt that CEO salaries in the US are a major part of the economic problem we face.
Many CEOs make almost 300% more than the average worker in the US; not only that, they give themselves increases and deny increases for those in the lower levels of their companies.
A salary adjustment for all company execs. in the US would help fix a major part of the economic problem this country is facing.
Another fix is taking away their ability to give themselves increases; if they cannot give an increase across the board in their companies then there should be no increase for anybody.
Also increases should be a modest percentage, 5-10% for all When the company is doing well and if C.O.L.A.is needed.
105. Mish | 09.22.09
If you can earn $500k on your own, without a corporate structure to support you, go for it. Otherwise, submit to the cap and thank your lucky stars.
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1. CEO Pay Is Not Performance | 02.04.09
If the CEO doesn’t think $500K is enough: QUIT!!!
If you did such a great job that your company needs a taxpayer bailout, well, good riddance!