Gee, How Much Does A Bailed Out Executive Make, Anyway?
The New York Times is reporting that the Obama administration announced a $500,000 pay cap that prohibits bonuses for any companies that take additional taxpayer assistance.
Executives at companies that have already received money from the Treasury Department would not have to make any changes. But analysts and administration officials are bracing for a huge wave of new losses, largely because of the deepening recession, and many companies that have already received federal money may well be coming back.
Crucial details remained unclear on Tuesday night, including whether the restrictions would apply to all companies that receive money under the so-called Troubled Asset Relief Program, or TARP, or whether they would apply only to the “exceptional” companies that were being rescued from collapse.
The Times went on to list some executives from severely troubled companies — and their current salaries.
Kenneth D. Lewis, the chief executive of Bank of America, took home $5.75 million in salary and bonuses in 2007. His total compensation was around $20 million.
Vikram Pandit, who became chief executive of Citigroup in December of 2007, $3.1 million.
Richard Wagoner, of GM, took a $1.6 million salary. His total compensation was over $14 million.
Oh no, how will they afford custom asteroid mansions now! Perhaps there are some weekend nannerpuss-puppeting positions open to help fill in the gap.
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This was the problem with the bailouts.
i approve the nannerpuss link in every post from now on
I still think we should have just let all these companies collapse and the private market jump on them like sharks on chum. My Wall Streeter fiance disagrees.
It's one thing to regulate, but these companies had already failed. All we're doing is tossing our life support into the black hole. Now they're telling them how much they can make...great, cuz that will totally solve our problems!
Wait, you mean outrage isn't really the whole source of the economic collapse?
The first time I saw this posted on the homepage, it linked to an article about Petco and plastic bags.
I refresh the page and there's a story about some Ticketmaster merger (or something) that linked to a story about Coldplay.
I need to go home early from work. I seem to be hallucinating again. =S
Hmm.. Most of these people have a lifestyle that requires a hefty sum of money.. Lowering that to $500k will be a huge hardship for some of those folks..
Could you live on 1/30th of what you make now, but with 100% of the same bills?
@thebluepill: I'm sure they can sell their expensive cars and houses to make up the shortfall. and if your expenses are 14 million a year, there's plenty of places to cut back.
@thebluepill: Here's an idea. They could do what other people do when their pay can no longer sustain their lifestyle: change it.
I'd be perfectly willing to run GM into the ground for only $400,000 a year.
@B:
Selling a $10m house in this market isnt exactly easy..
Sometimes pairing down expenses is very expensive in itself..
No, they wont starve.. but it could be devestating.
The problem is the cap is arbitrary. I can completely stand behind covenants and restrictions, but doing this is just going to drive a lot of compensation underground and off the books.
How about they just stick with a total salary allotment per head, based on NAICS company type and size, then let the people in the comany decide how to divy it up? When everyone is trying to grab onto the same compensation pool, they'll have to allocate it efficiently. And demand full transparency of exec pay in these companies, even if it's privately held.
@thebluepill: Excuse me if I don't cry for them while they're making 1/30th of what they're used to, and a mere what, 10? 20? times what their company's lowest paid workers are getting. Yes, I'd be hard pressed to survive on 1/30th of my current pay, but that's because it would only pay for about a month's worth of groceries, say nothing to fancy cars, multiple houses, etc.
We're all now investors in these companies, thanks to the bailout. As an investor -- I personally would like smart executives that make enough to care about the company.
@thebluepill: Even counting the highest salary/bonus combo listed here: 5.75 mil for BofA CEO, that nets a reduction in take-home assets of 25%. (5 million less in salary+bonuses out of 20 million in total compensation -> 15.5 million in Obama-regulated compensation).
Could I live off of a 1/4 reduction in salary? Yes, easily.
And out of the other CEOs listed, the 1/4 reduction is the highest. In other words, your question should have been: Could you live off of 75% or more of what you make now?
While it makes Obama look like he doing something, I doubt most of the executives affected will notice it much, unless you cap TOTAL compensation. NOTE: Obama only mentions capping salaries and bonuses. There are many more avenues for compensation than just cash.
I was listening to the Planet Money podcast the other day and they made a good point: even though these executives' salaries are huge compared to what most of us make, they're a tiny fraction of the billions of dollars they're receiving in bailout money. Limiting their salaries won't really make a difference.
So now there will be abandoned mansions facing foreclosure?
@thebluepill: @thebluepill: When a person goes to a credit counselor to hopefully avoid bankruptcy, they're told they need to buck up, tighten their belts, come up with a budget they can live with while whittling away at their debt. Pretty much a cold, hard slap in the face of reality.
What you just said is that basically these people that have spent and spent and spent should not be bothered by tightening their belts. They're excempt because they possibly owe millions (much more than the average Joe). Bull..... They've spent and or borrowed just the same as poorer people, just on a larger scale. Just as the "average Joe" has to scale down, so should they. They should be slapped in the face with reality just as anybody else who owes and is used to considerably less.
@Ash78: That's an excellent point, hadn't even thought of that. Arbitrary caps really don't make a lot of sense. Covenants and restrictions baby!
One of the suggestions some credit counselors make is to rent out those extra rooms in your house. I'm sure these CEOs have plenty of empty rooms in their mansions that they could rent out to people who lost their homes in foreclosure.
Another interesting fact I learned today, the Baseball Commissioner makes 17 million. Course, baseball isn't going bankrupt, but gotta wonder how many people/companies will be bucking up to renew those season tickets.
Thank goodness - these clowns do not even deserve 100k/yr imo.
Linking executive pay to the stock price won't solve the problem - they'll just be higher turnovers. CEOs will over inflate the stock's high (again) and then "retire" before it falls.
@Donathius: I would like to see the aliens from Mars Attacks:
Vikram: We would like another $5 billion, please!
Commerce Sec: brak...brak brak... BRAK BRAK BRAK!!! *pulls gun and fries vik*
I'm totally okay with the $500k cap, for a whole host of reasons. I'm sure if these execs perform as needed to get their companies out from under the need for taxpayer bailouts, they will have earned substantial bonuses. But, up to this point, they don't deserve the benefit of the doubt, as they helped to create the situation they and their companies are in.
In the meantime, they also need to practice looking for cost-cutting measures, which they obviously aren't doing much of on the job. At home, they won't have a choice if this cap goes through. However, I'm sure that with the cap, these individuals still won't be living paycheck to paycheck, as many, many of their companies' customers do.
With any luck, the salary cap will lead to more turnover in these positions, so these self-important albatrosses can be replaced with qualified individuals who are interested in proving themselves.
@IT-Chick: That's okay, at least they're being encouraged to squat in their foreclosed mansions by congress.
these CEOs do it for stock options anyways. The reason why those $1 a year CEO love the stock options is because it's not taxed like personal income (no FICA and such; and they get to pay lower capital gains if they hold it for 18 months.)
As I frequently say on here, we need to make the "golden parachute" a literal reality. If you run a huge company into the ground and then ask for a bailout, fine, but you then get a choice between your "severance package" and a parachute seconds before we toss you out of a plane.
@razremytuxbuddy: They helped create the situation they and their companies are in.
Nov 7, 2007 - Citigroup CEO Charles Prince resigns
Jan 22, 2009 - Bank of America CEO John Thain resigns
June 2, 2008 - Wachovia CEO Kennedy Thompson resigns
How did the people now running the companies get their predicesors into this mess?
oh NO! what if they have to refinance? You know the market today banks aren't lending to anybody.
@thebluepill: The thousands of people who have lost their jobs thanks to the economic collapse these executives precipitated are living with a 100% reduction in salary. The executives can live with a big pay cut. The alternative is we don't bail them out, their companies fail, and they too join the unemployment line.
The fact that they're even having to be told this is just appalling. People who can't figure this out shouldn't be in charge of anything.
@thebluepill: I probably couldn't live on 1/30th of what i make now, but at the same time, I don't think the government would bail me out either.
@Hoss: The executives who made buckets of money clearly weren't smart enough to keep their firms afloat without taxpayer rescue. Obviously large salaries were not enough to assure that. Seems to me the incentive of staying in business and keeping their jobs ought to be sufficient.
They have been making the money for years. They still managed to run the company into the ground and still make a fortune. Maybe, hitting them where it hurts might change their tune.
Lol, so they are living a lifestyle they haven't earned, and hardworking taxpayers that are afraid they might lose their job or home are supposed to foot the bill? I guess if they can't afford to live off of 500k, then they better find a way.
No, they wont starve.. but it could be devestating.
If you run a 100-year-old billion-dollar company into the ground, costing thousands of people their jobs and livelihood, don't you DESERVE a little devastation?
Everyone else gets FIRED when they eff up on the job! Not a bonus. Not a paycut. Fired.
Frankly, I think if you have maneuvered your company so far into the hole that you need a government bailout, your options should be: Quit or Indentured Servitude. They keep saying they won't be able to attract good execs if they can't help the execs maintain that cocaine-and-hooker lifestyle, but maybe the reality is that cocaine-and-hooker execs aren't actually any good at what they do!
Tough luck for everybody's retirement plans that rely on the stocks of those companies. Now the companies won't be able to grow.
The good execs won't have any incentive to work at a struggling company (that really needs the experienced help), and will go work elsewhere in the private sector. The bailed out companies will have to settle for the same idiots that aren't good enough to actually work in their industry and work as college professors.
There's not even a fine line between being a consumer advocacy/news organization, and expressing editorializing, petty jealousy. For shame!
Class jealousy is never ending. First we'll go after the guys that make more than $1 million, then we'll go after the guys that make over $100,000, and then the rest of you will come after the rest of us that make over $30,000, because, you know, once you're limited to $30,000, how are us uppity rich folk going to afford to buy brand name soda-pop?
@jsbeagle:
I know right? The jobs market is hot, hot, hot right now. They will have no problem finding jobs immediately. Especially with credentials like "I was head of a failing company that required government bailout in order to maintain operations."
@balthisar: I do agree with your basic point about class jealousy and trying to bring down those who are more successful than ourselves. It reminds me so much of Atlas Shrugged, but on the other hand, I do believe that these CEOs are in a position to really take advantage of the system and overpay themselves. Shouldnt their pay and bonus structure be tied to company performance? All these banks and corporations are crumbling, and these guys are still bringing home millions of dollars.
Plus I totally agree that if your company requires a federal bailout, then all employees inc. CEOs must be required to abide by whatever guidelines the fed sets forth. As far as I am concerned, I am their boss now.
@HIV 2 Elway Resurrected: But it wasn't just the CEOs that ran these companies down. It was a whole collection of higher-ups, the majority of whom are still in the same positions. The CEOs may be the public faces of the companies, but there are plenty of others who share the blame.
@Troy F.:
The bluepill has the worst case of misplaced empathy I've seen in a while.
If you're looking for people to feel sorry for and throw around words like "devastating" take a quick spin to the unemployment office. Feel free to share your story about the woe's of CEO lifestyle.
Good luck.
How is this class jealousy? When my kids get out of control, they get grounded (privileges restricted) until they can prove they can handle responsibilities and make better decisions. That's exactly what this is, except the CEOs even have the option of going someplace else (ie, running away from home).
This is simply resetting the scale back to the bottom. When the CEOs in question, or their successors, can once again prove that they can manage their companies properly, they'll get their money again. It might be worthwhile to get some of the same old faces who keep circling through different companies (with similar outcomes) replaced with fresh perspectives.
@tbax929: Since you tend to make more money the greater your failure rate, you guys would need to be fairly competent at your job.
Now if you demand $10 million that's the kind of incompetence I could bring to the table.
Dude in the picture looks like an old Dwight Schrute.
Bears, Beets, the American economy.
So who thinks Chewbacca will be confirmed as Commerce Secretary? Personally, I'm pulling for the Underpants Gnomes.