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Wall Street CEO's May be Forced to Take Involuntary Pay Cut

Published 09/24/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

With Congress set to approve a $700 billion bailout package for the struggling financial market, many lawmakers are worried that their constituents may view the bailout as a plan that rewards the bad behavior of the extremely wealthy. That’s why Congress is taking aim at Wall Street CEO’s and their exuberant compensation packages, according to the International Herald Tribune.

Wall Street, however, is fighting back with the help of the Bush administration. Treasury Secretary Henry Paulson said that adding caps on executive compensation to the emergency bill could potentially derail massive severance pay for CEO’s. Others have claimed that limits on pay would limit incentives for hard work and innovation.

"Anyone taking assistance from the federal government should have dramatic limits over their executive compensation," said Rep. Peter DeFazio (D-OR). Taxpayers shouldn't be on the hook "to make these firms whole ... so they can pay their bonuses this Christmas."

Last year, the average total compensation for a CEO of one of the five largest companies in the U.S. was $12.8 million - 275 times the salary of the average American worker. In the 1970’s CEO’s made just 35 times the salary of the average American worker.

It appears the days of grossly overcompensating CEO’s may be over, as curbing executive pay has become a rallying cry on Capitol Hill in recent days.

"I think the taxpayers should expect no less than strict limits on the type of executive compensation that might be possible for those involved in these partially government-controlled enterprises," Sen. Mitch McConnell (R-KY) said on Tuesday.

Congress seems to be especially adamant about ending the practice of CEO’s receiving ungodly severance packages, or “golden parachutes.”

Before the government takeover of mortgage giants Fannie Mae and Freddie Mac, the two CEOs of those companies were scheduled to take home a combined $24 million in severance pay.

Source Bloomberg News:

The U.S. Congress wants Wall Street to feel it where it hurts: the wallet.

The stratospheric pay packages of Wall Street executives have become a lightning rod issue as Congress shapes a historic $700 billion bailout for financial firms. Proposals circulating on Capitol Hill vary, but they all would impose some limits or approval authority on salaries of executives whose firms seek help.

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