CEO Compensation Back in the Spotlight

As the bailout debate continues in Congress, the subject of executive compensation, which had faded into the background somewhat since companies started to grapple with the SEC’s heightened disclosure rules, is once again rearing its head.
The Treasury Department is going full throttle to get a bailout bill approved quickly while some members of Congress argue that the bill should curb t he compensation that chief executives of companies that benefit from the bailout can receive. Former chief executives of Fannie Mae and Freddie Mac have already been told by housing regulators that the millions of dollars of severance pay guaranteed under their employment contracts are out the window, but they’ll still receive pension benefits. Former AIG chief executive, Robert Willumstad, who had only been on the job since June, made the decision to forgo his $22 million severance payment because he wasn’t able to execute the restructuring plan he had developed, according to The Wall Street Journal.
Formalizing executive compensation limitations could slow down the bailout bill’s passage-- the urgency of which intensified as the stock market plunged Monday-- but members of both the house and the senate, on both sides of the aisle, argue that including safeguards to minimize the risk that executive compensation could cause more problems in the future is important.
Shareholder activists who have fought long and hard against financial excess for chief executives are ratcheting up the noise level about putting executive compensation packages to a shareholder vote—“say for pay”-- which was passed in the House but hasn’t yet been heard in the Senate.
But many economists point out that the numbers represented in executive compensation packages pale in comparison to the total dollar amount of the bailouts and the topic muddies the waters as Washington works to get the financial system back on track. To keep those waters as clear as possible in these murky times, the most likely scenario is that the bailout bill will include a provision to address the issue at a later date, which Senator Clinton told CNBC she supports, as most likely will other Democrats and Republicans as the bailout clock ticks.