In an election year, during a (mental) recession, it’s rather obvious that politicians will lambaste high executive pay. But it’s rare that the politicians have an opportunity to do something about the ballooning pay of the executives. So when Hanke Panke approached the hill today, hats in hand looking for a few hundred billion to save their cronies from bankruptcy, it’s entirely too logical that senators would insist on limiting executive salaries.
While we’re all for rolling back the pay of someone that played a key part in the global financial meltdown, we have a hard time wrapping our minds around how exactly it will be done. And we’re not alone apparently:
NYT: The proposals in Washington are still tentative, and often vague. A Senate draft document calls for a ban on incentive payments that the Treasury deems “inappropriate or excessive” and a “claw-back” provision, requiring executives to give up pay or severance benefits if the firm’s financial results are later shown to be overstated.
Other proposals call for a ban on severance payments and allowing large shareholders, with a stake of 3 per cent or more, to propose alternative slates of directors. This would be an effort to tackle excessive pay practices by opening up and strengthening corporate governance.
Some corporate governance experts say hastily devised compensation curbs in the bailout package would be a mistake and perhaps open the door to unintended consequences.
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