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For Immediate Release
February, 04 2009, 11:20am EDT
Contact:
Sarah Anderson, tel: 202 234 9382 x 227, email: saraha@igc.org
Media Availability on New Bailout Pay Rules
Expert analysts welcome Obama restrictions as sign of progress, but say tougher limits are needed to stop bailout profiteering
WASHINGTON
Compensation experts with the
Institute for Policy Studies (IPS) today called President Barack
Obama's
$500,000 cap on executive pay at some bailed-out companies a "small,
but
very welcome first step toward ending excessive executive compensation."
"After 30 years of escalating CEO pay, we finally have a president who
has
taken a concrete step toward limiting the dollars that are cascading
into
executive suites," notes Sarah
Anderson, lead author of Executive Excess, the
Institute's yearly
report that tracks the gap between CEO and worker pay. "But given the
level of
public outrage over the Wall Street bonus bonanza, the administration
should
have gone much further to stop bailout profiteering."
The key shortcoming of the administration plan is that the $500,000 pay
cap
will apply
to only a
handful of firms getting "exceptional assistance." In recent news
reports,
administration sources have argued that
troubled
banks would choose not to accept government assistance if broader pay
restrictions were imposed, for fear of losing key personnel.
But as IPS Senior Scholar Chuck
Collins points out, "The argument that super-sized paychecks are
necessary
to retain top talent doesn't hold water. It's that mentality that got
us into
this mess, as outrageous rewards encouraged outrageous behavior. Part
of the
solution to the crisis needs to be a new approach to compensation that
rewards
responsible business leadership."
"By arguing that companies wouldn't accept government assistance if
they had to
rein in executive pay, the administration is suggesting that the vast
majority
of companies getting bailouts don't really need the money," adds Collins. "That's not a winning argument
with taxpayers."
President Obama, in his remarks today, pledged to end the executive pay
"culture of narrow self-interest and short-term gain at the expense of
everybody else." But the pay curbs the President announced today, says
IPS
associate fellow Sam Pizzigati, only
begin the cultural change that's necessary to fix the failing U.S.
economy.
"So long as we tolerate these outrageous rewards, that outrageous
behavior -
the endless mergers that create workplace chaos, the downsizings and
outsourcings, the hammering of consumers with hidden fees - will
continue
unabated."
The Institute's pay experts favor a uniform cap for executive
pay that
would apply to all firms receiving bailout funds and all forms of
compensation.
Sen. Claire McCaskill (D-Missouri) and
several other
senators are behind a proposal to cap executive pay in bailed-out firms
at no
more than $400,000 - the salary of the President of the United States.
McCaskill has introduced the bill
as an amendment to the stimulus legislation.
Click here
for a more
detailed
analysis of the McCaskill bill and the executive pay provisions in the
TARP
reform bill recently approved by the House.
Encouragingly,
Obama
announced that these guidelines "are only the beginning of a long-term
effort"
and that they are "going to be taking a look at broader reforms."
In addition to stronger restrictions on bailout recipient pay, IPS
is
urging the Obama administration to support two specific steps that
could end
taxpayer subsidies for excessive executive compensation.
"The administration should ask Congress to deny all corporations tax
deductions on any executive pay that runs over 25 times the pay of a
company's
lowest-paid worker," says Anderson.
A generation ago, she notes, pay for most CEOs fell within a 25-to1
range. In
2007, top CEOs averaged 344 times average worker pay.The Obama
administration,
the Institute's experts propose, should make this same 25-to-1 pay
standard the
benchmark for any company that seeks a government procurement contract
or tax
break.
"No company that's getting our tax dollars should be paying its
executives
over 25 times what workers are receiving," says Pizzigati,
Contacts:
Sarah Anderson is the Director of the
Global
Economy Project at the Institute for Policy Studies and a co-author of
15 IPS
annual reports on executive compensation. Her views on this issue have
appeared
recently in The Washington Post,
The New York Times,
and on Neil Cavuto's "Our World" on Fox News. Contact: saraha@igc.org,
tel: 202 234 9382 x 227.
Sam
Pizzigati
is an Associate Fellow of the Institute for Policy Studies.
He recently commented on executive pay for "Geraldo at
Large" on Fox
News and "The Agenda with Steve Paikin"
(Canada's
Charlie Rose). Contact: editor@toomuchonline.org,
301 933 2710.
Chuck Collins
is a senior scholar at the Institute for Policy Studies where he
directs the
Program on Inequality and the Common Good. He has written extensively
on
executive pay and last year was the lead author of High
Flyers, a
report
on corporate jets. Contact: chuckcollins7@mac.com,
617 308 4433.
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.
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