February 5th, 2009
04:44 PM ET

Wall Street finds ways around executive pay caps

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/images/02/05/art.gfx.wallst.jpg]
Jim Puzzanghera, Christi Parsons and Walter Hamilton

President Obama moved Wednesday to rein in the pay of executives whose companies get taxpayer bailout money - putting a $500,000 cap on annual compensation, limiting "golden parachutes" to departing bigwigs and requiring corporate boards to adopt policies on luxury expenditures such as lavish entertainment and parties.

Corporate watchdogs applauded the intent of the new measures, but compensation experts cautioned that abundant loopholes - and crafty lawyers - could undermine any lasting effect.

"You're pitting a group of government bureaucrats against compensation consultants and lawyers who are paid lots of money, and they're pretty damn smart," said Graef Crystal, a former executive compensation consultant who has written six books on the subject. "It's a lot easier to find ways around things like this than it is to invent them in the first place."


Filed under: Bailout Turmoil • Raw Politics • Wall St.
soundoff (39 Responses)
  1. Brad Klemek

    Well said Mr. Keith Moore, CEO of KDM & Associates, LLC. I'm a CEO and also in Real Estate! The credit reporting companies and banks has fixed the credit game to rip off Americans! The FICO scores or any scores of any kind must be outlawed! It needs to go back to a person reading a report and making the call, not a computer. On the same note. I ran my own credit (all three) on credit report.com and My High score was 715 low was 670. One day later I had my loan broker run the same three scores and high was 679 and low 605, Well they should of been the same or within a point or two and records on the two pulls were the same! who is running the scam? We will need this reform as we try to get out of this Econ. mess!

    February 6, 2009 at 5:15 pm |
  2. Marvin

    There will be a brain drain and a loss of talent for the financial corporations if there is a CEO salary cap of $500,000? You have got to be kidding! Numerous Americans are in jobs with much greater complexity and pressure and requiring much greater talents than a financial institution CEO is in and get paid much less than $500,000 a year, let alone tens of millions of dollars, and these individuals are more than glad to replace any of these financial institution CEOs, do a much better job, and be paid $500,000 or even less a year.

    Government sets speed limits for roadways, prohibits unlicenced restaurants from selling liquor, requires individuals to pay income tax, etc. etc. As a matter of fact, the major function of the government is to enact, uphold and enforce the law to protect the American people in every facet of their lives, so what's wrong with President Obama enacting legislation to put a cap on the CEO salaries of the government bailed out financial corporations to stymie flagrant greed from preying on American citizens?

    February 6, 2009 at 2:30 pm |
  3. Sue Tootired

    I still don't understand the banks that continue to spend money wastefully. Every year BB&T (Branch Banking and Trust) executives go on a companywide tour and provide breakfast for top performers and lunch for banking officers. This tour is still being held this year even after all the discussion of wasteful spending. I understand BB&T has a new CEO and he probably wants to introduce himself but there are so many other ways to make this introduction. In addition to the tour the company also sponsors a top performer get away to places like Amelia Island. This too is still on the schedule. Why??? Receipt of bailout money should require these companies to eliminate wasteful spending and be held accountable for their actions.

    February 6, 2009 at 12:04 pm |
  4. Gina Bourdon

    1) How could these execs still be justifying bonuses? These are usually attached to the succesful meeting of objectives, I have to wonder what their objectives are?
    2) Someone questioned how they will manage to retain talent at a $500,000. cap, what talent? They are stealing, swindling, lying and cheating I say fire them all. If some poor guy steals from a grocery store we call the cops, these people are bringing a country to its knees, what are you all afraid of?

    February 6, 2009 at 10:45 am |
  5. Michael C. McHugh

    These "best people" on Wall Street are mainly crooks, con artists and frauds. I've known my share of them, and many would sell their grandmothers for a nickel.

    We really do need a new kind of banking system in America, including a government investment bank. We need to sweep out this corrupt group that has been running things all these years, and lead us to disaster. I doubt that the Democrats have the guts to make real changes like that, though. Too many of them just wilt every time the conservatives criticize them, and the conservatives know it.

    February 6, 2009 at 9:00 am |
  6. Steve in Las Vegas,NV

    If these greedy execs who have taken taxpayer money try to wiggle around and get caught, not just having to forrfeit those funds, but face a possible jail term ( or tar & feathers) if caught.

    The unbridled greed of some of these guys is amazing, but it has been going on for so long they feel entitled to this..It's their birthright.

    Well those days are gone for the foreseeable future. Of course when they have paid the funds back(with interest, of course), they can make all the money they want.

    February 6, 2009 at 2:40 am |
  7. carbar

    Gale Hopkins, do you truly believe no strings of 1st half of bailout $$ was due to incompetence? If you do then you don't know, Jack!

    February 6, 2009 at 2:09 am |
  8. carbar

    Bank Execs planted this story to slam Pres. Obama. Has anybody seen the actual details of bank borrowers? I haven't.

    Threatening to leave – don't threat do it! Any shareholder who chooses to do business with their start up biz deserve what they get.

    Imagine an overpaid exec marketing his new place as a safe and sound investment! LOL

    Banks can't thrive with the upper 1% of the rich to really profit legit.

    February 6, 2009 at 2:06 am |
  9. Luis

    Don't ever let the government tell you how much you should make. Never.

    Can we please follow the constitution? Freedom of contract.

    Get on the case CNN. what the hell? Anderson Cooper earns a lot of money, he will be a target as well in the future. Congress is pushing their NEO-MARXIST agenda forward.

    The reason why this country is in trouble is because everybody is deciding to break the laws and if they don't exist. Get on the case.

    February 6, 2009 at 12:37 am |
  10. Valerie Emerson

    Our country is in trouble due to the High price of everything, controlling Wall street money grubbers...the competition between this countries Big Business Executives is insane and way out of control..How can the average American survive, the high horse riding of the rich and famous. And the damage the big business has done to us. Taken jobs away from Americans and giving those jobs to foreign interests. And still expect us to buy their products. And they are not about to stand still for a smack on the back of the hand! Yes they will find ways around it. Is sad to say, but true. And the trickle effect will hit the middle class and the poor..But wall street Gents will sleep fine..Counting their gold plated dimes...

    February 6, 2009 at 12:00 am |
  11. J.V.Hodgson

    It is people like you and Lawyers who are now becoming part of the problem.
    Where is your national pride, patriotism?
    Do you see no need at all to change/ comply with a simple laws intent or is all you care about defeating the legislation to allow excessive greed and filling your own pocket with equally offensive fat fees and never mind the will of the people and your government as well.
    Note to the Senate, put in the bill a clause that says employment consultant or lawyers or anyone else who advises changes to avoid this law of Executive pay and benefits or rewards shall be fined the amount earned by the advised client in excess of $500,000.
    Up yours too!!

    February 5, 2009 at 11:46 pm |
  12. Elaine Cimino

    They always do. There is too much payola in the Legislature.There needs to be a cleaning of the house and tight regulations These ideologues have caused enough damage not only to us but to our grandchildren.

    February 5, 2009 at 11:39 pm |
  13. Keith Moore

    I Keith Moore, CEO of KDM & Associates, LLC would like to challenge this blog and CNN to help me and the taxpayers and small business owners in the country to ask the Congress and the Senate to bring before them the three Credit Reporting Agencies to testify .

    Once these executives of the credit reporting agencies share with the American public how they have lowered credit scores and increased requirements for consumers under the new law recently approved less than 60 days ago, we will all know that this is not about how much money goes into the stimulus bill, but its about the log jam in credit lending. after the rest of the TARP money goes to the banks, and as long as there are no new laws and conditions placed on the credit reporting agencies to relax score guidelines, then the banks like Bank of America will get 20 Billion dollars and continue to deny small businesses lines of credit, and individuals will not be able to secure mortgages without paying high fees and higher interest rates.

    Credit reporting agencies control the decision making of all banks on lending. And until they testify to Congress and Senate to our representatives can factor their testimony into the stimulus package, then we are all failing President Barak Obama and his and our need to get this economy back on track. Ask Ali Belcher if this is wrong or is this right on!

    February 5, 2009 at 11:35 pm |
  14. Mira

    Still remember the exec who redecorated his office that cost about a million dollars...(i.e., carpet $80.000)? It makes me sick to think that I, a 22 year college student, cannot find a job, while this is happening. I applaud Anderson for "keeping it honest," but sincerely believe that nothing much will result in discouraging these people to stop with the excessive spending. What's going on in this country?

    February 5, 2009 at 11:23 pm |
  15. Mark The Carpenter

    If the new administration isn't careful handing out billions of dollars to already very wealthy people, the average American might just stop paying taxes all together.
    Jail sounds alot better than homeless in Montana to me.
    Oh I forgot, if you have Zero income you pay Zero tax.

    February 5, 2009 at 10:44 pm |
  16. Sam in GA

    Obama is willing to limit their compensation but he isn't willing to tax it. This doesn't make sense to me. So many people agree that executives make too much money. Why not tax it and tax it at a very high rate? I can't think of a better way to recoup our tax money than to tax their money! And why don't they revoke the tax break that companies get for employing overseas workers and tax that too? There is no better incentive than taxes but in Washington and on Wall Street, TAX is a dirty word.

    February 5, 2009 at 10:37 pm |
  17. Jeremy

    The real question is very simple...Why are their bonus NOT tied to profit?

    As an employee my bonus has always been based on PROFIT.

    We should actually limit all executive pay to say 200x the avg non executive pay for the company for all LLC. Since they hide behind the protection of the LLC; of which taxpayers pay when it fails; they should be limited by the govt. If they want to make $100 million..FINE...but make sure everyone in the company gets some..

    February 5, 2009 at 10:22 pm |
  18. Kristen-University Park, PA

    How about stop bailing out companies whose owners, executives shareholders and who ever else are worth millions amongst themselves.

    They need to bail themselves out, thats what every other American suffering from this mess is doing. Its ridiculous that they screw up get bailed out with tax payers money and we just stay screwed. I am over stimulus packages and the bail outs.

    Government wants to help the economy, put those billions of dollars in the hands of people it belongs to, us the tax payers. Not greedy corporations who obviously don't care about thing else besides money going into their pockets, regardless of the cost.

    February 5, 2009 at 10:21 pm |
  19. judith armstrong

    Live and learn...as my Grandmother always said put your money in real estate or a sock don't gamble with it on the stock Market!

    February 5, 2009 at 10:20 pm |
  20. Dorothy Morgan

    I agree with President Obama. If these hot executives want bail out money, they need to tighten their pockets. Listen there is a lot of people in this Country that makes a hell of a lot less. I am a prime example. I receive 1400.00 in disablity compensaton and my husband is running his small business as a painter. We cut back long time ago, before 911. If these executives can not work for this, I know there are many more that is willing and able to do their job. Lets face it what are they doing? Receiving pay for not doing a job well. I don't have a business degree, be I can dress up everyday and set in an office and look good. Need no brain to do that. Oh, I forgot I am not one of the Good-OLD-Boys, Corporate America, that has run this Country into the ground. President Obama, perhaps you can look outside of the Capital to find somenone that is educated, not polictical, to help make decision. to get this Country back on its feet. For now, FAT CATS, need to step back. Take the money they have stolen. Yes, stolen, they did not earn and go home and enjoy. We can not get that money back, but we can see that they do not receive anymore.

    February 5, 2009 at 10:05 pm |
  21. Brad Klemek

    The stock holders should be out raged!!! Out with these guys! we don't new CEO's with degrees! We need CEO's with some class and Compassion. Like small business CEO's

    February 5, 2009 at 9:55 pm |
  22. Gale Hopkins

    We give banks billions of dollars without any oversight and are flummoxed that they use it to pay out million dollar bonuses...please. That's like letting the fox in the chicken coop and being suprised when there are no chickens left in the morning.
    What a glaring example of how inept and incompetent our government is to throw millions of taxpayers dollars at a problem without implementing any quidelines on how it may be allocated. Isn't anyone else outraged? This money has a very easy paper trail to follow. Those who got those bonuses should have to reliquish them....period. Why doesn't the government insist that money is returned? Why aren't you news reporters out questioning each and every one of those bonus recipients (instead of following Britney, Brad and Angelina) and asking them if they are going to return the money and if not ...how they sleep at night.
    Gale Hopkins
    Round Top, Texas

    February 5, 2009 at 9:07 pm |
  23. Timothy Gibson

    Loopholes, long a problem of American politics should not go without consequences. When limits are placed there should be laws of punishment to back them up even if a loophole is found and wormed through.

    The non-sense of bail out funds being used to further the personal gains of individuals and fund lavish retreat weekends etc must stop.

    Must we as citizens go back to the days of pitch forks and torches to have any sense of justice or do we sit quietly as legal actions bend and wind themselves through any attempt to stop the bleeding of our nation.

    This in my humble opinion is a breed of American terrorist and they have to be stopped and if necessary brought to justice in the name of honor and respect for our nation and the outcome from this dark downward spiral.

    February 5, 2009 at 9:00 pm |
  24. Joy in Seattle

    Should execs reward themselves during a time of failure and struggle? – NO.

    Does that give the government the right to regulate the pay of private companies? NO!!!

    We are trying to solve a wrong by a further injustice. We don't solve our problems in this country by stealing someone's liberties, freedoms, or rights. Taking away the right of a company to run itself is wrong.

    February 5, 2009 at 8:36 pm |
  25. Anthony

    If any corporation is in need of government backing and uses the money to pay outlandish executive bonuses ought to be put of business and forced to pay the tax payers' money back. Receiving tax payer money and claiming it as a part of the company's earning is not a measure of success, nonetheless an excuse to award executives. The intent behind Obama's initiative is quite plan and simple: to ensure that the taxpayers' dollars are spent wisely, not on jets, cocktail parties and perhaps escorts. The government should be able to regulate government money, plain and simple. Get over it or don't ask for a handout.

    February 5, 2009 at 7:53 pm |
  26. Jim M

    Establish a new Administrative Court system under the Treasury Department to enforce the regulations for compensation related to the bail-out without appeal to any state or Federal Court. Perhaps Gitmo could provide a location to hold the objectors until they have their court date! Free tents for their defense attorneys!

    February 5, 2009 at 7:52 pm |
  27. Jimmy in Virginia

    I think Larry Flint made a lot of sense a few weeks ago with the porn bailout. It is just absurd to bailout a business of any kind. If I make a product that no one will buy capitalism dictates that I should go out of business. That is what we need to do, let them go out of business for making stupid decisions. We need to reward companies that do good business.

    Do you honestly think that bailing out the banks will keep them from harassing borrower’s to pay their mortgage? There is always going to be someone who is going to collect the debt of a homeowner! The best idea I’ve heard is the 4% home refinance deal. That is one that will go directly to those in danger of foreclosure assuming their beacon score has not fallen for lack of not paying their bills.

    February 5, 2009 at 7:44 pm |
  28. herb

    I agree with the president-on pay caps .The greedy executives will find with their lawyers loop holes example- they will triple their stock options i could go on and on. I come from the farm and when we would slop the hogs (feed) no matter how much you gave them to eat it's wasn/t enought get the picture

    February 5, 2009 at 7:16 pm |
  29. Isabel Abreu, Brazil

    Here in Brazil, I heard Arnaldo Jabor (contributor Globo TV) comment that the ceiling of $ 500,000 is rasoavelmente low and, perhaps, the executives seek for new stops, due to this value.

    This comment is feasible?

    February 5, 2009 at 7:11 pm |
  30. Patti

    Finding a way around paycaps? Wow...... really? Big surprise? Knew this was coming...... that's why these guys make "big" money. What arrogant smucks!!

    February 5, 2009 at 7:09 pm |
  31. Brad Klemek

    I have my own Economic plan!! We have loans with B of A , Countrywide, Wells Fargo! We have stop paying our mortgages untill the banks stops spending our tax money, come to the table and help Americans in this time of need!! Think about it! If we stopped paying the big banks and took that money and pay the companies we owe that have been good to us, take the rest and go to the movies, week end trip or buy a new Blue Ray player. I'm giving my money to the little guys in bussiness. I think we could get the banks to understand that WE THE PEOPLE mean business!!!!!! The Fat wall street cats are who need to pay NOT THE AMERICAN PEOPLE!

    February 5, 2009 at 6:50 pm |
  32. Scott-Atlanta

    Executives should only make 10 times the average pay of all workers within their company.

    February 5, 2009 at 6:45 pm |
  33. Gene Penszynski from Vermont

    As far as I'm concerned these execs. gave up any private sector rights they had the minute they accepted tax payer money. The now work directly for US ladies and gents and they should be held to the exact rules of any government employee who works for us. That should close many if not most of those 'loopholes'.

    February 5, 2009 at 6:45 pm |
  34. earle,florida

    Come on,"Exceptional Aid",that's an opening I can drive a truck thru! This government is keen on giving free passes,at taxpayers expense! I love their accounting gimics,of always inserting 5-10 years out to realize the gains,then in 5 years they make revisions for another 5-10 yeares out ,fullfilling the circle of deceit,...disgusting

    February 5, 2009 at 6:24 pm |
  35. Joe

    Not to be on the side of execs, but how can the government say a CEO of a $1 trillion company can only make as much as the CEO of a $250 billion company because they both borrowed money? That's not really fair.

    On the other hand, I would probably say to those who borrow from Uncle Sam, ok, here's the deal, if your company finds legal loopholes, that's fine, it's your legal rights, you've got smart lawyers and they know how to swerve around the intent of the law, but you're going on the government's bad list and for the next 50 years, the government will not lend your company a dime and oh yeah, we will get the list of your 50 largest accounts and they'll be on our bad list too. You can fool us once here, but you will not fool us twice. These companies all know the intent of the law. The real problem is where is the stick if they ignore the intent.

    The PROBLEM with everyone high up in the system is that they only know one MO. For the financial instutitions, it's "take the money up front and worry about the fallout later" and for Congress, it's "pass the Democratic pork bill now without bipartisan support and worry about bipartisanship later." I think the President should veto the bill unless he gets a reasonable number of Republicans to join the cause. Otherwise, IT'S A PARTISAN DEMOCRATIC BILL. If the President really wants to change Washington, he has to tell his own party to put childish things away too. Now is the time.

    February 5, 2009 at 6:17 pm |
  36. Paula Vergara, Boston, MA

    Time will tell if this plan will work – I'm sure President Obama will be monitoring the implementation of this plan very carefully, and the media will be keeping close tabs on any attempts made by bank executives to work around these restrictions. President Obama is a lawyer, and I'm sure he's aware of the tricks that other lawyers use to bend the rules.
    In other words...he's no fool.

    February 5, 2009 at 5:53 pm |
  37. Annie Kate

    Whether they have good lawyers or not, executives of corporations should not make more than what the leader of the free world (Obama) makes – 400,000 a year. Obama has much more responsibility than the corporate executives and runs an entity (our country) which is much larger and complex. Any corporate executive who thinks he is worth more than the President is paid needs to have his head examined and his ego pruned.

    February 5, 2009 at 5:10 pm |
  38. Cindy

    Well when I heard of Obama's plan to cap all of the senior execs. pay checks I automatically thought that they would find ways around it! They do after all have good lawyers and are all mostly crooks so they cheat people for a living. They know where the loopholes and such are to be found and will use them.


    February 5, 2009 at 4:57 pm |
  39. xtina, chicago IL

    here's a perfect example of how conservatives differ and are better than liberal Democrats. There are lots of conservatives I've talked with who agree with this . If you take gov't money all bets are off. I came to that opinion independent of the "news" and of group think. It's just right. It's a no-brainer that comes from convictions. Not really anything to do with emotion, which is what most lib. Democrats use to gauge things.

    February 5, 2009 at 4:51 pm |