Get out your wallets. The Treasury releases its executive-compensation plan for bailed-out banks.
Just in from the U.S. Treasury: the eagerly awaited rules on executive compensation for the partially nationalized big banks.
Last year, the CEOs of the nine banks to be bailed out raked in nearly $300 million (see the above chart, adapted from info compiled by the Institute for Policy Studies).
So the question is: How many Americans does it take to stitch a golden parachute?
The good news is that, according to “Treasury Announces Executive Compensation Rules Under the Emergency Economic Stabilization Act,” most golden parachutes for bank execs are supposedly forbidden under King Henry Paulson‘s bailout scheme.
The bad news, says the IPS, is that the rules contain “no set limits on compensation” for each of the nine banks’ top five execs.
And specific limits have been desperately needed since long before this crash — unless you consider annual bonuses of $185,000 a day something that they can live with while you’re living with a median income of $48,201 a year.
Here’s the IPS’s early take:
The key rule on executive compensation allows the Treasury Secretary to look the other way if bailed-out firms continue to hand out massive paychecks to executives.
The rule merely requires that the Treasury ensure that “incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution.”
Neither the legislation nor the Treasury Department rules define what might constitute an “unnecessary and excessive risk.”
“There is nothing in the Treasury Department’s new rules that would prevent a nationalized bank’s board of directors from approving a $20 million CEO pay package — unless the Treasury Secretary decides that reward poses an excessive risk to the institution,” says IPS executive compensation expert Sarah Anderson. “Without clear limits on pay, the public is being asked to put their trust in Secretary Paulson, a man who made hundreds of millions of dollars as a Wall Street CEO, to decide what’s ‘excessive.’ ”
This article from the Village Voice Archive was posted on October 14, 2008