More of this please:
My administration will do what it takes to restore our financial system; our recovery depends upon it. And so next week, Secretary Geithner will release a new strategy to get credit moving again — a strategy that will reflect the lessons of past mistakes while laying a foundation for the future.
But in order to restore our financial system, we’ve got to restore trust. And in order to restore trust, we’ve got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street.
We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses. As I said last week, that’s the height of irresponsibility. That’s shameful. And that’s exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis: a culture of narrow self-interest and short-term gain at the expense of everything else.
This is America. We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.
For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste — it’s a bad strategy — and I will not tolerate it as president. We’re going to be demanding some restraint in exchange for federal aid — so that when firms seek new federal dollars, we won’t find them up to the same old tricks.
As part of the reforms we are announcing today, top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at $500,000 — a fraction of the salaries that have been reported recently. And if these executives receive any additional compensation, it will come in the form of stock that can’t be paid up until taxpayers are paid back for their assistance.
Companies receiving federal aid are going to have to disclose publicly all the perks and luxuries bestowed upon senior executives and provide an explanation to the taxpayers and to shareholders as to why these expenses are justified. And we’re putting a stop to these kinds of massive severance packages we’ve all read about with disgust; we’re taking the air out of the golden parachute.
We’re asking these firms to take responsibility, to recognize the nature of this crisis and their role in it. We believe that what we’ve laid out should be viewed as fair and embraced as basic common sense.
Finally, these guidelines we’re putting in place are only the beginning of a long-term effort. We’re going to examine the ways in which the means and manner of executive compensation have contributed to a reckless culture and quarter-by-quarter mentality that in turn have wrought havoc in our financial system. We’re going to be taking a look at broader reforms so that executives are compensated for sound risk management and rewarded for growth measured over years, not just days or weeks.
It may be common sense, but it is also a very significant (almost radical) move on President Obama’s part to limit executive pay for bailed out companies and to promise to regulate executive compensation in general. I don’t think the fat cats are winning the P.R. war.
