Bailed Out Firms Finding Ways to Flout Compensation Caps
More news on the business ethics front: Some Wall Street firms receiving billions of dollars in taxpayer bailout funds are finding creative ways to get around executive compensation limits imposed by the government, The Wall Street Journal reports.
In response to expected bonus restrictions, officials at Citigroup Inc., Morgan Stanley and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees, people familiar with the situation said.
The crackdown, part of the economic-stimulus package passed by Congress and signed into law by President Obama last month, limits bonus pay for the top five executives of any recipient of taxpayer capital through the Troubled Asset Relief Program, plus the 20 next-highest-compensated employees.
The discussions are at an early stage, partly because the government hasn’t yet issued specific rules on the bonus payments that will be allowed at companies that received TARP aid. The talks also are proceeding cautiously because of the political volatility of pay, bonuses and perks on Wall Street, including outrage over American International Group Inc.’s promise to pay $450 million in bonuses to employees in the insurer’s financial-products unit.
Nice to see patriotism in action. Per my earlier post, it’s time to demand that these companies operate in the open. Maybe it will take subpoenas, or public hearings, or a scolding from the President. But whatever it takes, it’s time to get more aggressive in making these firms accountable for the way they’re using public money. There’s plenty the government could do here, such as requiring a detailed and public accounting of compensation payments, so the people can see — and judge — for themselves, or imposing some kind of penalty for companies that try to cheat the public.
The Journal notes that these companies are proceeding cautiously, because they are sensitive to public outrage over their actions. But they’re still apparently forging ahead to flout the pay limits, which were put in place for a reason.. They’re playing us for fools. The question is, what are we doing about it?