The Obama admnistration yesterday announced that it would impose a $500,000 cap on executive salaries at institutions that participate in TARP -- known affectionately as the "bailout." The policy comes after the public became outraged over reports of corporate jets, high salaries and other "shocking" details (yes - sarcasm) and lavish spending among TARP participants.
The Department of Treasury released an official statement of the policy. Here are some highlights.
The salary cap is mandatory only for executives at institutions that receive "extraordinary" assistance, or bank-specific agreements with the government, rather than the generalized assistance available to all banks. This is a smaller subset of TARP participants.
General TARP participants can waive the $500,000 salary restriction -- if they make the salaries public and explain why they are not excessive.
The salary cap does not include restricted stock awards.
Stock awards cannot vest until after the company has paid the government in full, plus interest -- or (a major exception) "after a specified period according to conditions that consider among other factors the degree a company has satisfied repayment obligations, protected taxpayer interests or met lending and stability standards." Translation: If the company becomes healthy again, the executives can get their stock awards.
My favorite is the anti-plane rule (my language). This do-nothing provision purports to establish policy related to "aviation services, office and facility renovations, entertainment and holiday parties, and conferences and events." The companies' boards of directors must adopt policies on these matters and place them on their webpages.
Oh, and these requirements do not apply retroactively to current TARP participants.
Update: LA Times article reports that corporate watchdogs say policy is pretty weak.