United States President Barack Obama has launched a campaign to rein in corporate compensation with rules limiting executive pay to $500,000 a year for companies getting taxpayer bailout funds in the future.
Obama, who sharply criticized Wall Street chiefs for accepting billions of dollars in bonuses last year while the economy fizzled, has promised compensation reform as part of a package of stricter regulations on the financial industry.
An Obama administration official said the new rules would require companies that get exceptional government funds from the remainder of the $700-billion bailout package to abide by the cap.
Additional compensation must be limited to restricted stock that does not vest until government money is paid back with interest.
Companies that have previously received bailout money, such as financial giant Citigroup and insurer AIG, would have to agree to stricter oversight and prove they have followed established restrictions on executive compensation, which are widely seen as being too lax.
"This is a reasonable approach," Obama said when describing the restrictions in an interview with CNN on Tuesday.
"It's not a government takeover. Private enterprise will still be taking place, but people will be accountable and responsible and that's what we have to restore in the financial system in general."
Obama's measures come after his own outrage and public outcry over $18.4 billion in bonuses paid out in 2008 at a time when taxpayer money was shoring up the financial system.
The new rules will require banks to give shareholders greater say over the money paid to company chiefs, according to the administration official.
They will also put restrictions on golden parachutes — the lavish severance packages common for senior executives — and require more transparency for costs such as aviation services, big parties, office renovations and conferences.
Healthier financial institutions that receive more generally available government funds will also be subject to the requirements unless shareholders vote to waive them.
Obama's announcement set in motion a long-term process to rein in high salaries on Wall Street, including steps to require all public financial institutions — including those not receiving government funds — to disclose compensation arrangements and prove that they are compatible with sound risk management.
Measures to make corporate executives adopt a long-term approach to their business, such as requiring them to hold stock for several years before it can be cashed in, would also be considered.
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