Obama To Cap Executive Compensation At Firms Receiving Help at $500,000
We’re going to be demanding some restraint in exchange for federal aid.
– President Obama on Wednesday
If you have someone who was making well over $1 million, and now they are capped at $500,000, it is very conceivable that they are going to look to go to a company that is not subject to those limitations.
– Mark Poerio , Partner at law firm Paul Hastings
President Obama announced today a $500,000 cap on executive pay at companies receiving “exceptional” government aid. One thing to note is that this is going forward so it doesn’t apply to anyone yet.
But isn’t it pretty obvious that if you are an executive whose market value is in the millions and you’re forced to take a fraction of what you could get elsewhere that you are going to leave? Why stick around? Let it be someone else’s problem if you’re not going to be compensated for the difficulty of task.
The unintended consequence of this will be the best talent leaving the troubled banks where they are most needed. Not only will these banks have crippled balance sheets, they won’t have the best people to deal with the situation.