SUBSCRIBE TO OUR FREE NEWSLETTER
Daily news & progressive opinion—funded by the people, not the corporations—delivered straight to your inbox.
5
#000000
#FFFFFF
5
#000000
#FFFFFF
For Immediate Release
October, 14 2008, 01:01pm EDT
Contact:
Sarah Anderson, tel: 202 234 9382 x 227, saraha@igc.org
Analysis of Treasury Department Rules on Executive Compensation
WASHINGTON
The Treasury
Department today issued
rules
for
executive pay for firms participating in the government's financial
sector
bailout. These rules clarify some provisions of the bailout
legislation, but
reinforce the law's major shortcoming: the failure to set any specific
limit on
the pay of top executives at bailed-out companies.
The bill applies three different sets of executive compensation
criteria,
depending on whether 1) the government provides equity capital to the
institution, 2) provides direct assistance to a failing institution, or
3) purchases
troubled assets through auction. The strictest criteria apply to the
failing
institutions.
SUMMARY
OF EXECUTIVE PAY RULES
Capital Purchase Program | Programs For | Troubled Asset Auction |
Limits on pay: Treasury will ensure | No limits on pay | |
Clawback: Bonuses or other awards | No criteria on clawbacks. | |
Severance: Ban on "golden | Severance: Ban on all payments to | Severance: Ban on golden parachutes |
Cap on tax deductibility: | ||
DETAILED ANALYSIS
Major shortcoming: No set limits on
compensation
The key
rule on
executive compensation allows the Treasury Secretary to look the other
way if
bailed out firms continue to hand out massive paychecks to executives.
The rule
merely requires that the Treasury ensure that "incentive compensation
for
senior executives does not encourage unnecessary and excessive risks
that threaten
the value of the financial institution." Neither the legislation nor
the
Treasury Department rules define what might constitute an "unnecessary
and
excessive risk."
"There is nothing in the Treasury Department's new rules that would
prevent a
nationalized bank's board of directors from approving a $20 million CEO
pay
package - unless the Treasury Secretary decides that reward poses an
excessive
risk to the institution," says IPS executive compensation expert Sarah
Anderson.
"Without clear limits on pay, the public is being asked to put their
trust in
Secretary Paulson, a man who made hundreds of millions of dollars as a
Wall
Street CEO, to decide what's 'excessive.'"
The Institute for Policy Studies has calculated that the nine major
banks being
bailed out by Treasury paid their CEOs a combined $289 million in 2007.
Nationalized banks | CEO in 2007 | total compensation in 2007 |
Merrill Lynch, | John Thain | 83,092,713 |
Lloyd Blankfein | 53,965,418 | |
John Mack | 41,734,815 | |
J.P. Morgan Chase | James Dimon | 28,856,330 |
Bank of New York Mellon | Robert Kelly | 20,515,810 |
State Street | Ronald Logue | 19,551,400 |
Richard Kovacevich | 18,510,694 | |
Vikram Pandit* | 3,160,000 | |
Kenneth Lewis | 20,040,000 | |
total |
| 289,427,180 |
*
Pandit was
promoted to CEO in Dec. 2007, 8 months after joining Citigroup.
Source: Associated Press inter-active online
survey. Includes stock options grants.
A Bright Spot: Cap on tax deductibility strengthened
The
Treasury
rules expand the $500,000 cap on tax deductibility to all participating
firms. The
bailout legislation just applied that cap to firms that sell assets to
the
government through auction.
The current U.S.
tax code places a $1 million cap on tax deductibility for executive
compensation, but this provision has been meaningless in practice
because it
allows exceptions for "performance-based" pay. Most companies simply
limit top
executive salaries to around $1 million and then add on to that total
various
assortments of "performance-based" bonuses, stock awards, and other
long-term
compensation. The bailout legislation was designed to close this
loophole by
eliminating that exception for executives of bailed-out firms.
Additional Rules
Ban on "golden parachutes": The top five senior executive
officers will face
restrictions on severance payments if they leave the company that's
getting
bailout dollars. The strictest rule will apply to executives of
"failing
institutions," who cannot receive any type of payment upon leaving the
company.
Congress is right to ensure that executives who drove the country into
this
mess should not be allowed to walk away with massive payoffs.
Clawback: Executives of bailed-out firms who receive bonuses or
other
awards that later turn out to be based on "materially inaccurate"
financial
reports will need to give that money back. This rule applies only to
firms that
receive direct government assistance.
BROADER CRITIQUE OF THE BAILOUT BILL
For additional IPS analysis on the broader aspects of the bailout bill,
see: www.ips-dc.org.
These
materials include A
Sensible Plan for Recovery.
Institute for Policy Studies turns Ideas into Action for Peace, Justice and the Environment. We strengthen social movements with independent research, visionary thinking, and links to the grassroots, scholars and elected officials. I.F. Stone once called IPS "the think tank for the rest of us." Since 1963, we have empowered people to build healthy and democratic societies in communities, the US, and the world. Click here to learn more, or read the latest below.
LATEST NEWS
Top Medical Organizations Warn RFK Jr. Putting American Kids 'At Grave and Immediate Risk'
"Truth and transparency are not desired by the secretary... he wishes subservient confirmation of his misinformation and lies," stated a new lawsuit.
Jul 07, 2025
Six major medical organizations on Monday filed a lawsuit against Health and Human Services Secretary Robert F. Kennedy Jr. alleging he is putting American children at "grave and immediate risk" because of his policy on vaccines.
The plaintiffs in the lawsuit—including the American Academy of Pediatrics, the American College of Physicians, the American Public Health Association, the Infectious Diseases Society of America, the Massachusetts Public Health Association, and the Society for Maternal-Fetal Medicine—charged that Kennedy earlier this year made a "baseless and uninformed policy decision" when he removed vaccinations against Covid-19 from the Centers for Disease Control and Prevention's (CDC) official immunization schedule for "healthy" children and pregnant women.
The organizations emphasized that unless Kennedy's decision is reversed, "all children remain at grave and immediate risk of contracting a preventable disease" and further warned that it "exposes... vulnerable populations to a serious disease with potentially irreversible long-term effects and, in some cases, death."
The plaintiffs further charged that Kennedy's directive removing the Covid-19 vaccines from the immunization schedule was "but one example of the secretary's agenda to dismantle the longstanding... science- and evidence-based vaccine infrastructure that has prevented the deaths of untold millions of Americans."
The complaint then documented Kennedy's long history of statements and articles that have peddled false claims about the safety of vaccinations and pointed to his mass dismissals of staff at HHS and his appointment of likeminded vaccine critics to argue that "it has become clear that truth and transparency are not desired by the secretary, but rather he wishes subservient confirmation of his misinformation and lies."
Given this, the plaintiffs argued that Kennedy's decision to remove the Covid-19 vaccine from immunization schedules was "arbitrary and capricious" based on what they described as "vast and irrefutable evidence," including congressional testimony delivered by Kennedy in which he acknowledged that people shouldn't "be taking medical advice from me"; that Kennedy's directive directly contradicted an article published by the Food and Drug Administration days earlier stating that pregnancy was a condition that "increased a person's risk of severe Covid-19"; and that Kennedy did not identify specific recommendations from professional staff that he used as justification to restrict the availability of the vaccine.
Should courts find that Kennedy's decision was "arbitrary and capricious" as alleged by the plaintiffs, they would have the power to enjoin the policy under the Administrative Procedures Act, which was also employed recently to halt planned mass layoffs at HHS. The medical organizations urged courts to declare Kennedy's policy change "unlawful" and demanded "the restoration of the Covid vaccine recommendations for pregnant women and healthy children ages six months to 17 years" of age.
The medical organizations' lawsuit against Kennedy's vaccination policy comes at a time when infections of measles in the United States have hit a level not seen in more than three decades. The Washington Post, citing data from Johns Hopkins University, reported on Monday that there have been at least 1,277 confirmed cases of measles so far in the U.S. this year and the paper noted that this development "marks a public health reversal in defeating a highly contagious, vaccine-preventable disease as the anti-vaccine movement gains strength."
Keep ReadingShow Less
2% Wealth Tax on Just 3,000 Billionaires Could Raise $250 Billion a Year: Nobel Economists
"Not only is it necessary to impose a stronger burden of justice on billionaires, but more importantly, it is possible."
Jul 07, 2025
Seven Nobel laureates on Monday published an op-ed advocating for "a minimum tax for the ultrarich, expressed as a percentage of their wealth," in the French newspaper Le Monde.
"They have never been so wealthy and yet contribute very little to the public coffers: From Bernard Arnault to Elon Musk, billionaires have significantly lower tax rates than the average taxpayer," wrote Daron Acemoglu, George Akerlof, Abhijit Banerjee, Esther Duflo, Simon Johnson, Paul Krugman, and Joseph Stiglitz.
Citing pioneering research from the E.U. Tax Observatory, the renowned economists noted that "ultrawealthy individuals pay around 0% to 0.6% of their wealth in income tax. In a country like the United States, their effective tax rate is around 0.6%, while in a country like France, it is closer to 0.1%."
Although the "ultrawealthy can easily structure their wealth to avoid income tax, which is supposed to be the cornerstone of tax justice," the strategies for doing so differ by region, the experts detailed. Europeans often use family holding companies that are banned in the United States, "which explains why the wealthy are more heavily taxed there than in Europe—though some have still managed to find workarounds."
The good news is that "there is no inevitability here. Not only is it necessary to impose a stronger burden of justice on billionaires, but more importantly, it is possible," argued the economists, who say that taxing the overall wealth of the ultrarich, not just income, is the key.
The wealth tax approach, they wrote, "is effective because it targets all forms of tax optimization, whatever their nature. It is targeted, as it applies only to the wealthiest taxpayers, and only to those among them who engage in tax avoidance."
💡 "One of the most promising avenues is to introduce a minimum tax for the ultra-rich, expressed as a percentage of their wealth."Seven Nobel laureates in economics advocate for the Zucman tax in their latest op-ed.Read the full @lemonde.fr article 👇www.lemonde.fr/idees/articl...
[image or embed]
— EU Tax Observatory (@taxobservatory.bsky.social) July 7, 2025 at 8:05 AM
The anticipated impact would be significant. As the op-ed highlights: "Globally, a 2% minimum tax on billionaire wealth would generate about $250 billion in tax revenue—from just 3,000 individuals. In Europe, around $50 billion could be raised. And by extending this minimum rate to individuals with wealth over $100 million, these sums would increase significantly."
That's according to a June 2024 report that French economist and E.U. Tax Observatory director Gabriel Zucman prepared for the Group of 20's Brazilian presidency—which was followed by G20 leaders' November commitment to taxing the rich and last month's related proposal from the governments of Brazil, South Africa, and Spain.
"The international movement is underway," the economists declared Monday, also pointing to recent developments on the "Zucman tax" in France. The French National Assembly voted in favor of a 2% minimum tax on wealth exceeding €100 million, or $117 million, in February—but the Senate rejected the measure last month.
The economists urged the European country to keep working at it, writing that "at a time of ballooning public deficits and exploding extreme wealth, the French government must seize the initiative approved by the National Assembly. There is no reason to wait for an international agreement to be finalized—on the contrary, France should lead by example, as it has done in the past," when it was the first country to introduce a value-added tax (VAT).
"As for the risk of tax exile, the bill passed by the National Assembly provides that taxpayers would remain subject to the minimum tax for five years after leaving the country," they wrote. "The government could go further and propose extending this period to 10 years, which would likely reduce the risk of expatriation even more."
Keep ReadingShow Less
Case Challenging Trump's 'Ideological Deportations' of Pro-Palestine Students Heads to Court
"The policy chills noncitizens from speaking and, by extension, robs these organizations and their U.S. citizen members of noncitizens' perspectives on a matter of significant public debate," the Knight Institute said in a statement on behalf of the plaintiffs.
Jul 07, 2025
The Trump administration, for the first time, had to defend its policy of deporting immigrants for their political views in court Monday.
A case filed by a group of professors will be heard in a Massachusetts federal court. The lawsuit challenges attempts by the Trump administration to arrest and remove foreign-born college students from the country based purely on their pro-Palestine speech.
Though hundreds of cases have been filed against the Trump administration since January, this is one of very few that has reached the trial phase.
The case was filed in March by Columbia University's Knight First Amendment Institute on behalf of the American Association of University Professors (AAUP); AAUP's Harvard, NYU, and Rutgers campus chapters; and the Middle East Studies Association.
It is one of half a dozen other lawsuits filed following the arrest of Columbia graduate student and protest leader Mahmoud Khalil, who was abducted in the dead of night by plainclothes ICE officers and shipped to a detention center for nearly three months.
Khalil and several other students had their legal immigration status revoked not for having committed any crime, but because the Trump administration deemed their views at odds with the "foreign policy objective[s]" of the United States.
Secretary of State Marco Rubio, the defendant in this case, has acknowledged stripping the legal status of hundreds of student protesters based on their speech.
"The policy chills noncitizens from speaking and, by extension, robs these organizations and their U.S. citizen members of noncitizens' perspectives on a matter of significant public debate," the Knight Institute said in a statement on behalf of the plaintiffs.
In a pre-trial brief, the group argued that this "ideological deportation policy" illegally discriminates against students and faculty based on their pro-Palestinian viewpoints.
"The First Amendment framework that applies is straightforward," the brief said. "If a regulation of speech discriminates based on content or viewpoint, then the regulation is 'presumptively unconstitutional' unless the government demonstrates that it is 'narrowly tailored to serve compelling state interests.'"
The plaintiffs argue that the intent behind the Trump administration's stripping of green cards and visas from legal holders was to punish speech they found disfavorable and to coerce others into silence.
"Noncitizen members of the AAUP have been chilled by these ideological deportations and forced to self-censor in a variety of different ways, and citizen members have been harmed as a result, because they have been deprived of the insights and engagement of their non-citizen students and colleagues," the brief said.
They cited examples of professors scrubbing their social media accounts to remove commentary on the Israel-Palestine conflict, abandoning research on the Middle East that could prove too "nuanced" for the administration's liking, and even cancelling international travel for academic opportunities for fear of being disallowed entry back into the country.
"The First Amendment does not permit government officials to use the power of their office to silence critics and suppress speech they don’t like," said Andrew Manuel Crespo, a Harvard Law professor and general counsel of the AAUP-Harvard Faculty Chapter.
The AAUP lawsuit marks the first time the Trump administration will defend its use of deportations for political speech in court. But it is not the first time the courts will rule on its attacks against higher education.
Courts have blocked the Trump administration's efforts to ban Harvard from hosting foreign students and strip its funding, saying the measures violated due process.
While the case over deportations deals with non-citizens, AAUP President Todd Wolfson said it has implications for free speech for everyone in America.
"The Trump administration is going after international scholars and students who speak their minds about Palestine, but make no mistake: they won't stop there," Wolfson said. "They'll come next for those who teach the history of slavery or who provide gender-affirming health care or who research climate change or who counsel students about their reproductive choices. We all have to draw a line together—as the old labor movement slogan says: an injury to one is an injury to all."
Keep ReadingShow Less
Most Popular