As they say, it’s good to be a Bankster.
From the WSJ
President Barack Obama’s crackdown on Wall Street pay contains loopholes, and may have limited impact in restraining compensation, according to some executive-pay consultants and management attorneys.
Some compensation professionals already are pointing out potential holes in the rules, including tactics such as changing executives’ titles or rearranging pay packages. Just as past attempts by the government to restrict executive pay largely backfired, these people warn, the new curbs also may have unintended consequences.
The plan, announced Wednesday, includes a $500,000 cap on annual compensation for senior executives of companies that receive future “exceptional” government aid. Additional compensation would have to be paid in restricted stock or similar long-term incentive arrangements, which the executives could cash in only after the government is repaid, with interest.
Other recipients of future federal bailout money would have to place tougher limits on severance packages and disclose luxurious perks, such as the use of company jets. Annual compensation above $500,000 at these companies would be subject to a nonbinding shareholder vote.
“The mix of transparency and accountability is powerful and strikes the right balance to allow banks to continue operating effectively while operating under common-sense guidelines that rein in excessive compensation,” a Treasury Department official said Thursday.
Many applauded the moves as a useful step to curb Wall Street compensation practices that may have led to excessive risk-taking. But some critics identified weaknesses, suggesting the restrictions be retroactively applied to companies that already have received federal bailout cash. They noted that the most stringent restrictions likely would affect only a few firms; others could avoid some of the curbs by putting extra pay to a shareholder vote.
Some said the plan doesn’t limit total compensation, because it allows companies to boost awards of restricted stock.
“I am fearful that companies will look at this as an opportunity to grant more restricted shares and stock options to executives who already have an abundant amount of equity,” said Jesse Brill, a securities and compensation lawyer who is chairman of CompensationStandards.com, an advisory Web site. He would prefer barring executives from cashing in stock until age 65 or two years past retirement to encourage long-term decision making.
Michael Kesner, head of compensation consulting at Deloitte Consulting LLP, worries the plan allows executives to claim restricted-stock awards once the company pays back the government, and doesn’t require companies to tie those awards to operating results or share-price gains, as many companies now do.
“They’re actually saying we don’t care about performance,” Mr. Kesner said.
Others said the preliminary restrictions released by the Treasury Department are overly vague. For example, the $500,000 annual pay limit applies only to “senior executives.” James F. Reda, a New York compensation consultant, said companies could give certain executives lower titles or assign them to head subsidiaries.
“Now you’re going to have executives ask not to be called a senior executive,” said Steven Hall, a New York pay consultant.