October 8, 2008

Poking Holes in the Golden Parachute

The Wall Street bailout bill recently passed by Congress includes a provision that puts a $500,000 cap on the executive pay that the leaders of affected companies can deduct from their taxes.

According to the Christian Science Monitor, any executive pay on Wall Street exceeding that cap is taxable — yet some are concerned Wall Street executives will find loopholes that allow them to walk away with millions.

Initial versions of the taxpayer-funded bailout had no executive pay restrictions, but outrage from citizens and politicians alike forced Treasury Secretary Henry Paulson to make revisions.

Although it’s possible the executive salary cap could reverse the excessive trends of previous decades, Doug Elmendorf, a Brookings Institute expert, said “These are the most clever people when it comes to writing financial contracts. They will hire people to figure out how to get around it.”

In defense of their “golden parachutes,” some executives say their compensation depends on how well their company does on Wall Street, and say several other industries besides Wall Street are helped by government subsidies.

Nevertheless, the article says, such a public display of anger towards executive pay rates could indicate a general trend toward more stringent compensation guidelines.

–Julia Hengst/Newsdesk.org

Source:

“Could bailout’s pay caps launch Wall Street trend?”
The Christian Science Monitor, September 30, 2008

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