Obama Confirms Executive Pay Limits
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As expected, President Barack Obama announced limits on executive compensation for those companies receiving government assistance.
The restrictions will include a $500,000 annual pay cap for senior executives at companies receiving "exceptional assistance". Any additional compensation will have to come in the form of restricted stock that won't vest until the government is paid back with interest. In addition, executive compensation structure and strategy must be full disclosed and subject to a "say on pay" shareholder resolution. There is also a required provision to "clawback" bonuses to top executives engaging in deceptive practices. The plan will also increase the ban on "golden parachutes" and will require Board of Directors' adoption of company policy related to approval of luxury expenditures like aviation services, office and facility renovations, entertainment and holiday parties, and conferences and events.
Companies that likely fall under the "exceptional assistance" may include: AIG (NYSE: AIG), Citigroup (NYSE: C) and Bank of America (NYSE: BAC).
Financial institutions participating in "Generally Available" capital access programs will have less stringent restrictions. Senior executives at companies that received funds from "Generally Available" capital access programs also have limits of pay of $500,000+restreicted stock, but may waive the restriction by disclosure of their compensation and, if requested, a non-binding "say on pay" shareholder resolution.
It is unclear if companies like Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Morgan Stanley (NYSE: MS), Bank of New York Mellon (NYSE: BK) and and State Street (NYSE: STT), which were "arm-twisted" into taking original TARP money in a private meeting with former Treasury Secretary Henry Paulson, will be classified as "exceptional assistance" or "general".
Here is a link to the official release from the Treasury on the pay restrictions
The restrictions will include a $500,000 annual pay cap for senior executives at companies receiving "exceptional assistance". Any additional compensation will have to come in the form of restricted stock that won't vest until the government is paid back with interest. In addition, executive compensation structure and strategy must be full disclosed and subject to a "say on pay" shareholder resolution. There is also a required provision to "clawback" bonuses to top executives engaging in deceptive practices. The plan will also increase the ban on "golden parachutes" and will require Board of Directors' adoption of company policy related to approval of luxury expenditures like aviation services, office and facility renovations, entertainment and holiday parties, and conferences and events.
Companies that likely fall under the "exceptional assistance" may include: AIG (NYSE: AIG), Citigroup (NYSE: C) and Bank of America (NYSE: BAC).
Financial institutions participating in "Generally Available" capital access programs will have less stringent restrictions. Senior executives at companies that received funds from "Generally Available" capital access programs also have limits of pay of $500,000+restreicted stock, but may waive the restriction by disclosure of their compensation and, if requested, a non-binding "say on pay" shareholder resolution.
It is unclear if companies like Goldman Sachs (NYSE: GS), JP Morgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Morgan Stanley (NYSE: MS), Bank of New York Mellon (NYSE: BK) and and State Street (NYSE: STT), which were "arm-twisted" into taking original TARP money in a private meeting with former Treasury Secretary Henry Paulson, will be classified as "exceptional assistance" or "general".
Here is a link to the official release from the Treasury on the pay restrictions
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