10/21/2009

Government will cut the annual salaries of their 25 best-paid executives in firms getting bailouts by an average of about 90 percent

Pretty amazing. The government forced many of these institutions to take the bailout and then the can tell the firms how to be run.

Responding to the growing furor over the paychecks of executives at companies that received billions of dollars in the government’s financial rescue, the Obama administration will order the companies that received the most aid to deeply slash the compensation to their highest paid executives, an official involved in the decision said on Wednesday.

Under the plan, which will be announced in the next few days by the Treasury Department, the seven companies that received the most assistance will have to cut the annual salaries of their 25 best-paid executives by an average of about 90 percent from last year. Their total compensation — including bonuses and retirement contributions — will drop, on average, by about 50 percent. . . .


Here is a story that the seven firms that have gotten the most bailout money will face these largest cuts. How the number seven was arrived at is not obvious nor is there a statement about how large the cuts will be at other firms.

The seven companies are: Bank of America Corp., American International Group Inc., Citigroup Inc., General Motors, GMAC, Chrysler and Chrysler Financial. . . .


The DJIA went from being up by about 40 to falling down 92.

Stocks sold off late Wednesday after Wall Street learned that Washington would restrict executive pay at companies receiving bailout funds . . . .

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5 Comments:

Blogger Angela said...

Oh the market always tanks in October. Right?

I don't understand why people seem to assume that if they take away money from the executives that it will somehow end up in the hands of the workers.

10/21/2009 6:17 PM  
Blogger The Right Guy said...

Look at it like this: Once the top execs leave because of low pay, who will want the job? Then the government can say they have to put their own people in the job. Wesley Mouch wins, at least in the short term. In the end, the banks run by whomever mouch puts in place will probably go down the tubes, it be put on life support by the printing presses at the treasury.

10/21/2009 10:32 PM  
Blogger The Right Guy said...

Here is a question for John Lott:
Where is due process if these execs have contracts? How can the government violate them? I think the execs would have a case, no matter if the company agreed to take government money.

10/24/2009 2:42 PM  
Blogger John Lott said...

Dear Right Guy:

I would think that the CEO for Bank of America clearly has a case given that he is going to earning a negative income this year, but I assume that the government threatened him and BofA with enough other problems that he simply thought it better to walk away.

10/24/2009 4:18 PM  
Blogger The Right Guy said...

I guess I was wondering about other CXX's as well. I imagine they will walk if they have to take a cut like that. I would.

10/24/2009 6:40 PM  

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