I may never make $500,00 in my entire life. I guess I'm deprived.

Half a million? Shoot, i'll do it for half that. and I'll DOUBLE losses!

You can't beat that!

i believe abbie always said they tasted like chicken...

I'd be glad to run a business into the ground for $500K.

Because it puts a crimp on the executive compensation consultants fees. Part of the problem with executive compensation is not just folks with the big egos demanding shit. It's the idiot consultants/head hunters who make money on each hiring. Like sports agents, they want the biggest return for their clients because it brings in bigger fees thus they will always say that executives are under compensated for what they do.

A salary cap is a freeze on their income as well.

I've noticed (and I'm definitely not the only one) is that the bigger perks and compensation usually only attract those who like bigger perks and compensation and are not good at what they are supposed to do which is running a company. In my own dealings with such people, I find the majority of them to be self entitled, self centered, narcissistic, shallow and psychopathic assholes who would sell their own kids into slavery if it meant a bigger pay package for them. Not exactly the type you want as a leader.

I say good for Obama, if this hasn't been the best week for him.

I assume that if these companies pay back the government bailout money then they are free to pay their execs whatever they want. Seems like the motivation to really do a good job. Isn't that what the GOP keeps pushing when it argues for lower taxes?

Salary Caps?

You mean capping that $250 billion that Pelosi has so far given to rich bankers and shareholders?

Cap it at what exactly? I suggest we cap it at $250 billion, since that is now gone, and keep the rest. Then reduce the stimulus to $300 billion and go on our way.

what the heck is a "compensation consulting firm"? Do they gt paid for telling people how much they should get paid?

"That's Draconian"

means

"If you quit paying these people they may well turn state's witness and blow the whistle on the company. You really don't want us all to start telling the truth about business in America. Think of the loss of confidence worldwide if they knew!"

Short form:

"Pay my bonus or I'll shoot this dog."

How about just phrase it as no executive receiving bailout money should be paid more than the President of the United States. Kinda hard to make the argument that $400,000 is not enough to recruit top talent when it is good enough for Obama.

"Pay my bonus or I'll shoot this dog."

Go ahead. Make my day;>

I don't think it'll be quite that easy to find replacements, as you'd probably have to dig quite a ways down in the corporate structure (i.e. down to junior executives that have never had anything like the level of responsibility they'd assume) to hit people for whom $500k isn't going to be a pay cut.

It would probably depend most on how executives would value getting a shot at running a mid or large-cap bank and future rewards, which would normally be pretty significant, but it might lead to having to take nationalization options off the table (for better or worse).

I'm guessing that many execs will let their companies go under, so they can collect on their golden parachutes, before they'll apply for bailout money.

And just how many companies are there nowadays that can pay those astronomical fees? Not many. I think. Let them go and try to find their millions.

Not being able to recruit any more inbred blue-blood loser CEOs is a feature, not a bug.

The current crop of looser greed-heads needs to be re-assigned to the mail room until they are terminated for incompetence.

Offer 500,000 and a chance to show what a business stud you are, and you will end up with some actual talent.

There is no reason bankers should earn more than $50,000/year. If they want more the should become fast food franchisers.

Yeah, it would be hard to find "real" talent, such as Chrysler finding Nardelli - However, what "talent" did they hire? His successful tenure at GE or the debacle he created at Home Depot? His Platinum Parachute from HD is still keeping him aloft while begging for more mone.

Compensataion Consulting Firms keep the "Failing Upwards" school of MBAs in business.

A salary cap is a freeze on their income as well.

Worse than that. There's no need for their services at all if the government imposes a cap. And if this policy becomes more widespread, as a result of their being no real difference in performance at a capped firm vs and uncapped firm (which is what I would expect; CEO is not that difficult a job in most organizations).

What a great example for American business: you know some CEO will be "somewhat" successful with one of these failed companies on $500,000. Other businesses can then say, "Hey, CEO at ABC Corp. made it work for $500k, why are we paying our guy $10mm+?"

Or, is it too early in the morning for hope?

Does this also apply to incoming executives, who may actually fix the company? Because that doesn't seem like a great idea.

But yeah, the guys who f***ed it up and asked for a bailout, I'm not so sympathetic towards.

Gosh, this 'draconian' measure might lead to the hiring and promoting of MBA graduates who actually understand and believe in ethical business practices and get that compensation and bonuses depend on sound decision making.

Bad news for successful firms who have not needed bailout money, these pampered CEOs are coming to an executive suite near you and will do for you what they did for all the failed and bailed out banks.

Notice what he said?

He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

What elitist crap!

Whatever happened to the old idea of growing your own CEO's, training and preparing them internally inside the company? Is he afraid they'll actually have to (shudder) promote someone from the wrong social class?

Interesting, there are clear economic benefits of salary caps. Like terry said, the caps will motivate the execs to get their companies off the government gravy train. And if the execs leave, then we may see that there are many, many young people who can do these jobs as well, if not better, than the overpaid execs. This could be a game changer.

I'm sure there are some fine executives in Europe or Asia that could be persuaded to run these firms for $500K. Heck, make it competitive and they might do it for $350K or $500K.

Cry me a frickin' river.
I understand they have created lifestyles for themselves that reflect multimillion dollar annual incomes, but they can always go to a non TARP receiving company.

The whole notion that "talent" requires ridiculously extravagent salaries, bonuses, stock options, perks and benefits totalling in excess of a million dollars needs to be examined. Especially since these compensation packages are not tied to job performance as measured by the a. long term profitability and viability of the company b. welfare of employees and the general public (in terms of job creation, worker protection, environmental responsibility). It is really time that we examine the entire oligarchical structure of corporate America and how our politicians protect "the free market" so that people who fail get "golden parachutes" and bonuses etc.

I wonder if this could be part of a sea change? We can only hope.

Draconian? Draconian?? DRACONIAN???

There are not enough swear words in the English language to describe my reaction to that reaction to a HALF MILLION DOLLAR salary cap. These people must go. I didn't say "die," but we sure as hell don't have to pay their goddamn salaries.

The salary cap would be applied very narrowly to those institutions that have required massive bailouts to stay afloat (BofA, Citi, etc), not to all of them. And it's a fine idea.

What I can't accept, however, is this attitude that we just have to allow these firms to skate on the $18 billion they stole (yes, stole) from taxpayers to hand out in "bonuses", presumably for jobs not well done. This issue could be easily addressed with a minor provision to tax code stipulating that employees of firms receiving TARP funds in 2008, or of firms that failed and were bought out by other firms receiving TARP funds in 2008 (I'm lookin' at you, Merrill Lynch) and who received bonuses be taxed at a rate of 100% on those bonuses.

I've had others around the blogs tell me that retroactive tax increases are "unconstitutional". Not so - there is a long list of such tax increases going all the way back to 1909, and the courts have upheld them.

So, write to your congressmen and senators, and demand that they take back your money that was stolen. I've already written not only to mine but also to the White House, Barney Frank (because this is the kind of thing he loves) and Claire McCaskill (since she's introduced salary cap legislation). If several million people were to demand it, we could get it done.

A special bonus to this plan: it's virtually guaranteed that at least several Republican members of Congress and their media enablers can be counted upon to publicly discredit themselves with keening and wailing about the unfair "confiscatory" tax rate that the evil Dems are trying to impose on money stolen from the taxpayers.

So, get writing!

"Because it puts a crimp on the executive compensation consultants fees."

Oh, possibly worse than that. They will all end up getting paid the maximum so no need for compensation consultants at all.

Well, except to justify giving them more stock.

Executive unemployment may be the solution to the rest of the problem: My brother-in-law has an MBA and Masters in Computer Science but has been working at Home Depot, where his store is one being closed. He is AVAILABLE to step in for any of these guys who refuse to work for their measly $500K, since he is now newly back in the job market! He would also accept less than the $500K - a real bargain.

500,000 is Draconian in NY. I know it doesn't sound that way but the cost of living here is ridiculous. I don't really care about the current crop of dopes but you will have a hard time recruiting a replacement internally or externally. Anyone qualified or competent at lower levels in banks or brokerages is paid at least 500. Who would move up? Now, a structure with a nice payoff if things succeed might be enticing enough but it would have to be apparent up front.

It is a stupid idea, when the money makers see the writing on the wall they will bail, leaving a post open that pays next to nothing (when compared to their peers) or ride the company into the ground so they can collect their millions.

I work in tax and the equation for executive bonuses is insanely complicated. But at least once a year I get a call along the lines of "How will leasing computers vs. buying effect bonuses". Never mind the fact that leasing computer is beyond idiotic, but they are expensed that year, which make that years bonus better, so of course we leased.

I suspect your average high-end Executive spends a lot of time making decisions based on bonus rather then company. Another example, I think we routinely make mid size company purchases to increase income because the base for any bonus is operating profit. So if you need $100 to hit you top level bonus, but you are on track to make $85, find a company that will contribute $15.

My point is if Obama, who has never worked in Corporate America thinks he is going to out fox guys who have been here for 30 years, have nearly unlimited legal and consulting services, he is crazy. That would be like some high level manager thinking he is going to go to Washington and out fox career politicians.

Plus of course, are they going to count the perks as income, office fixtures, car services, personal corporate jet usage, etc. All that of course is income on their tax returns or are we just going to count the cash, because let's face it, if we don't, they will just give them gold bars or stock or stock options, and on and on.

I say a bonus should never exceed their salary (for anyone) and no more CEO's on corporate boards. The only reason these clown make millions is they all sit on boards that determine each others salaries and they use very complicates equations to hide their real incomes. You want to pay someone millions, just do it, quit giving them small salaries and bonuses that are hundreds of times their salaries.

Weird, I don't remember anyone scoffing that there was no way in hell that Steve Jobs would be willing to return as the head of Apple for a measly $1 a year salary when the company seemed to be going under for the last time. And yet Jobs seemed to think at the time that turning the company around was more important than figuring out how to draw a second multi-million-dollar salary.

Executives who are more interested in getting the highest compensation they can than in doing actual work will shy away from taking the jobs. Executives who are interested in accepting a challenge and bringing a company back from the brink are the ones who will take them. Sadly, with the state of our business schools and business environment, I think they're going to be very hard-pressed to find any CEOs who are more interested in running a company well than they are in their paycheck.

Like my boss always tells me, "If you think you can do better somewhere else, go for it."

So, Mr. Executive of a failing bank: Don't let the door hit your ass on the way out!

BONUS ... NOT STOCKS BONDS

Part of the problem with CEO's pays has been that CEO's bonuses are paid in stock or stock options. This results in a very short term view on the part of the CEO because the CEO has an incentive to raise the stock price -- and there are many ways to do this, without making the company in question more profitable or better managed.

I would tend to make their bonuses dependent on the long term viability of the company.. ergo have them paid in company bonds. This way the value of the company is protected because is one mismanages the company or parces it out, the value of the bonds decline.

I don't think it'll be quite that easy to find replacements, as you'd probably have to dig quite a ways down in the corporate structure (i.e. down to junior executives that have never had anything like the level of responsibility they'd assume) to hit people for whom $500k isn't going to be a pay cut.

I think this is a poor reason to reject the idea. The problem with those executives this legislation would hit is that those executives are in it only for themselves. There are many people who would take the job for much less just for the challenge of it. (After all, President Obama didn't want to be President for the "huge" salary (nowhere close to what these execs are making) and said yesterday that it's the challenge he likes). I agree with Rep. Frank who said it's ridiculous we have to motivate these executives with bonuses to get them to do their jobs. And, frankly, they haven't been doing their jobs. Their jobs are to make these companies successful, not line their own pockets. Let's get the focus off their pockets and onto viable businesses.

It is my understanding that in Europe the executives of companies are not compensated anywhere close to ours and they think it's crazy. (Kind of like how we pay far more for health care that isn't any better than that in the single payer systems, and worse in terms of average life expectancy).

The gap between executive compensation and compensation in terms of executive pay equaling so many times the average worker has never in history been greater. I think the sheer magnitude of their compensation has removed them from the necessity of dealing with reality.

Curiously enough, there is a precedent for this proposal, and it comes from... our Republican friends. One of their proposals many years ago in one of their attempts at "tort reform" was a maximum wage. That proposed maximum was 500 dollars an hour - but only for attorneys.

I'm thinking it's a good idea overall. 500 an hour works out to about a million a year. Does anyone actually need more than a million a year? Or, if you want to be fair, five million?

I love his line that the salary cap is going to cause all the talent to jump ship for better paying jobs.

Hah.

Most of those guys are lucky to be employed. Wall Street is shedding jobs like crazy. No more leaving Morgan for a better deal at Merrill.

The only ones who might land a better deal are the equity analysts who end up at a boutique asset management shop. To the extent they can deliver good performance, they'll do just fine.

But there are only so many such jobs out there.

All the rest of those high performers whose work can only be done inside a big fat bank are now toast.

Let's be reasonable. You can't expect an executive to run a company into the ground for just a measly $500,000. That's a skill that warrants far higher compensation.

Uh, seriously, "$500,000 is not a lot of money"?

In 2007 (the most recent year for which there is a report), the 95th percentile limit of household income in the US was $177,000 dollars, meaning 95% of households in America were bringing in less than $177,000.

If that's seriously an argument you want to take to the public against this proposal, particularly in these economic circumstances and from an industry looking for yet another round of government handouts, well, good luck with that; I don't think there are a lot of people that are going to buy it.

It's a perfect cap.

Anyone who says they can't live on $500,000 is obviously lying and is the kind of greedy scum that needs to be cut off at the knee.

Anyone who says they should get more than $500,000 should've proved it by not taking federal money for their failing bank.

How much do the GS and SES schedules pay out? How much do cabinet secretaries make? The president?

Yes, I'm sure a CEO has a much more stressful job than the Secretary of Defense and deserves righteous compensation.

But it's so easy....if they want more than $500K a year, DON'T TAKE TARP MONEY. Easy choice.

Why is it not legal to hunt people like James Reda for sport?

"Why is it not legal to hunt people like James Reda for sport?"

Amen, sister.

It's all about compaative ability and substitution. Most CEO's are not worth the money they are paid because there are cheaper substitutes available who would probably do almost as good a job.

Here's a baseball example. Manny Ramirez is out there right now demanding $20-25 million a year. As good as he is, most teams, including the two most frequently mentioned as his suitors (the Dodgers and Giants) have much cheaper substitutes available. Both teams already have three major-league quality outfielders, including good young LF who make less than $1 million a year.

Now are these substitues as good as Manny Ramirez? Probably not. But they are good enough that neither team seems particulary interested in hiring Manny to replace them at 20-25 times their salary.

Is everybody that naive???? If anyone thinks that these bankers aren't going to figure out how to get around this cap, they are just plain stupid!!!!! Obama said that the cap is going to be for the senior executives, but money managers make 10-20 million a year. So these guys will get demoted and their secretaries will now be senior executives!!!!!!!!!
OBAMA, AMERICA W A K E U P!!!!!!!!!!!! It's business as usual,just different names!!!!!!!!!!!! ONLY in America do people that know how to steal billions of dollars get rewarded!!

This from Geithner is a little condescending:

“There is a deep sense across the country that those who are not responsible for this crisis are bearing a greater burden than those who were,� he said....

Sounds like he still thinks this "sense across the country" is debatable. Of course the hundreds of millions of us who were not responsible for this crisis are bearing a MUCH greater burden than the idiots who raked in millions while their banks assets turned to shit.

Obama used chide that McCain wasn't a bad guy, but that he just didn't get it. When are Obama's guys going to start to "get it?"

Well first of all these CEO's don't have to accept taxpayer money. And if these ass clowns want to go elsewhere to work who is hiring them? I don't think that most people realize how entrenched and powerful this culture of greed and lawlessness is. Look at Madoff sitting in his penthouse under house arrest. These guys have so much money and political influence that they can get away with anything.

Again they couldn't get away with it if it the media didn't provide them cover.

As Branch Rickey told his star player Ralph Kiner when he asked for a raise: "We finished last with you, we can finish last without you."

Sounds like he still thinks this "sense across the country" is debatable.

Sounds to me like he is implicitly warning those in government that are most likely to resist Obama's approach, who may not particularly care who actually is being unfairly harmed, but because they are elected officials that must face the voters again, do care what the public perception is on that score.

I agree that bonuses are in order for CEOs and upper level management that improve shareholder value above and beyond the average for their industry. I would set up my (admittedly fanciful) structure like this:

there's a two tiered bonus structure. employees below the director or senior executive level may be paid in cash or the options package described below, at their option. all bonuses are subtracted from the quarterly numbers reported by that particular business unit. if a manager wants to pay a bonus to his/her employees, it comes out of the numbers he/she reports to the executives and then on to shareholders. your unit 'made' a $100m dollars last year and gave out $50m in bonuses? then you really only made $50m. report that. it's a new form of profit sharing, but since it takes the profit before the shareholders see it, then it should be reported as such.

for senior executives/directors: compensation should be in cash, primarily. however, since long term investment in the future is what's good for shareholders, I propose the following stock option bonus system.

everyone in the options system agrees to the following structure. options are dated five years in the future from the day they are granted. the price on the option is the 52 week volume weighted average of the stock price (the previous 52 weeks, of course) obviously, if you can't improve the performance of a company over five years, you really shouldn't be there. every year, an executive has a financial incentive to look five years into the future. because the price changes every year (and is the same for all executives) if I do something to pump up the stock price this year that will be detrimental in five years, I know my next set of options will be even more expensive for something that may not be worth it in five years. every executive eligible for this program receives two options for every dollar of their compensation package. generous, right? if you make $500,000 in total compensation, and the stock grows by five percent a year, your bonus each year is two million dollars and change. if you grow the stock 8 percent a year, your bonus is $3 million.

ahh, and here's the catch. because bonuses are tied directly to stock price and dated five years away, for everyone, we need to make it a bit more golden handcuffy. so by entering into this bonus-option agreement, it is binding on both sides so for five years after you leave, the company is required to grant the options, year after year, and you are obligated to buy them. these option purchases are, in essence, an asset of the firm, you owe them this money. so if you set the place up to fail after you leave, well, you will be paying yearly for that. if you set it up for success, you make a nice annual income after leaving. if the firm is taken over, we establish some sort of mechanism to value the options against continued performance. if the firm ends up in receivership, you are a debtor, expect the judge to come looking for money.

please note, this would only apply to publicly traded firms. private firms can continue to do whatever the heck they want. any blackout period following an IPO, for instance, would be exempted (since IPOs do serve a critical function for new corporate development) average valuation doesn't kick in until 6 months after the IPO to help relieve bubble pressure.

ok, I know this is never going to happen (imagine tying compensation to performance like some small business!) but it's a company I would like to invest in.

It is a stupid idea, when the money makers see the writing on the wall they will bail, leaving a post open that pays next to nothing (when compared to their peers) or ride the company into the ground so they can collect their millions.

I work in tax and the equation for executive bonuses is insanely complicated. But at least once a year I get a call along the lines of "How will leasing computers vs. buying effect bonuses". Never mind the fact that leasing computer is beyond idiotic, but they are expensed that year, which make that years bonus better, so of course we leased.

I suspect your average high-end Executive spends a lot of time making decisions based on bonus rather then company. Another example, I think we routinely make mid size company purchases to increase income because the base for any bonus is operating profit. So if you need $100 to hit you top level bonus, but you are on track to make $85, find a company that will contribute $15.

My point is if Obama, who has never worked in Corporate America thinks he is going to out fox guys who have been here for 30 years, have nearly unlimited legal and consulting services, he is crazy. That would be like some high level manager thinking he is going to go to Washington and out fox career politicians.

Plus of course, are they going to count the perks as income, office fixtures, car services, personal corporate jet usage, etc. All that of course is income on their tax returns or are we just going to count the cash, because let's face it, if we don't, they will just give them gold bars or stock or stock options, and on and on.

I say a bonus should never exceed their salary (for anyone) and no more CEO's on corporate boards. The only reason these clown make millions is they all sit on boards that determine each others salaries and they use very complicates equations to hide their real incomes. You want to pay someone millions, just do it, quit giving them small salaries and bonuses that are hundreds of times their salaries.

There was a report on CNBC today that 12 executives fled from Citi (who took TARP money) to Deutsche Bank (which does not) last night in preparation to avoid the "cap".

Just like those H1B visa "brain drain" claims, this is getting real.

neo:

well, one would hope, for the sake of DBAB, that the executives who left are competent and therefore not likely to be the ones directly responsible for losses. if DB wants to hire people who lost their last company billions of dollars in a year, sounds like it's their problem.

The drumbeat from the conservative commentariat is that salary caps are counterproductive because companies won't be able to attract "top people."
If I understand correctly, this means we should continue to pay these clowns top dollar, plus bonuses, plus perks -- because they're the best that America has to offer? Wow! If that's true, we are soooo screwed! Not to worry, though. I suspect that companies will have no difficulty finding capable, reliable managers to fill these CEOs' big, floppy red shoes.

Consider the messanger. Reda runs a compensation consulting firm. Salary caps mean no business for compensation consulting firms. Greedy compensation consultants are just the enablers for greedy CEO's. The more reports they write justifying over the top multi-million dollar salaries, the more CEO's hire them for consultation.

My point is if Obama, who has never worked in Corporate America thinks he is going to out fox guys who have been here for 30 years, have nearly unlimited legal and consulting services, he is crazy.

I might suggest that Obama has people working for him that have been working in Corporate America just as long, and also has considerable legal and strategic services available to him; Obama isn't one guy winging the whole thing on his own.

Watch for the highest ranking non-"top executives" to start making millions with bonuses and a number of lower execs who get promoted to CEO, leap frogging their better paid superiors.

You can fly a Cessna through this loophole. What's in a title?

I'd also prefer to see Bernie Sanders anti-trust remedy. Any company the fed bails out gets split into four pieces. three of them will be allowed to die if they get in trouble again.

Hell, for a half-million, I could run a firm into the ground every bit as well as the current crop of executives did -- and save money in the process.

Yeah, it would be hard to find "real" talent, such as Chrysler finding Nardelli - However, what "talent" did they hire? His successful tenure at GE or the debacle he created at Home Depot? His Platinum Parachute from HD is still keeping him aloft while begging for more mone.

And he paid Cerberus $50Mil to get that job.

Ouch. Some terrible logic here, in both the original post and the comments. Where to start? Well, before I start, let me say that I strongly support this compensation cap, so when I point out that the arguments here are flawed and stupid, it doesn't mean I oppose the measure.

* Steve seems to think that the fact that lots of people "willing to make a name for themselves" would work for $500k means that those people are just as talented as people *not* willing to work for $500k. Maybe, but it certainly doesn't follow. An average crackhead off the street would do the job for $50k/year. That doesn't mean it's in a company's best interest to pay that.

* Someone up there seems to believe that executives in "Europe or Asia" are paid substantially less and would work for "even $350k". Where that assumption comes from, I have no idea. Executives in Europe and Asia are compensated just as lavishly as here in the U.S.

* A bunch of wags seem to think that because current management was overpaid and did a poor job, excessive pay *causes* poor performance. Correlation is not causation! Paying people less will not automatically improve their performance.

* Business is inherently risky, and some firms will lose money, even with the best management. There are world class poker players who make smart decisions but who still lose a lot of money at times. It doesn't make them less skilled poker players. Good executives *maximize your chances* of good returns; they don't guarantee good returns any more than great poker players are guaranteed to win.

Look, it's easy to hate what's going on. And I absolutely think that Obama's cap on executive pay for bailout recipients makes a ton of sense. But rather than doing the "well, I can ruin a company for only $100k/year" sophistry, can we talk about more interesting stuff?

I like the fact that Obama's plan allows companies to bonus executives with stock options, so long as those options are only redeemable after the company has paid the government back? That's a very clever incentive, and it's been completely missed in this poorly informed discussion.