Bloomberg.com: Politics
2/5/2009
Some analysts said the new rules wouldn’t have much effect.
Excerpts:
Executives at Goldman Sachs Group Inc., JPMorgan Chase & Co. and hundreds of financial institutions receiving federal aid aren’t likely to be affected by pay restrictions announced yesterday by President Barack Obama.
The rules, created in response to growing public anger about the record bonuses the financial industry doled out last year, will apply only to top executives at companies that need “exceptional” assistance in the future. The limits aren’t retroactive, meaning firms that have already taken government money won’t be subject to the restrictions unless they have to come back for more.
Some analysts said the new rules wouldn’t have much effect.
In addition, some executives may be compensated for the potential reduced salaries with restricted stock grants, which may result in huge paydays after the bank repays the government assistance with interest.
“They’re just allowing companies to defer compensation,” said Graef Crystal, a former compensation consultant and author of “The Crystal Report on Executive Compensation.”
According to the new guidelines, announced at the White House yesterday by Obama and Treasury Secretary Timothy Geithner, senior executives at banks that negotiate “exceptional assistance” deals with Treasury, such as the targeted relief provided to Citigroup Inc. last November or to Bank of America Corp. in January, would be limited to annual compensation -- salary plus bonus -- of $500,000.
Read full article: http://www.bloomberg.com/apps/news?pid=20601070&sid=azVLk.22AkLI&refer=home
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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
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