WASHINGTON (AP) — Assailing out-of-touch corporate pay and perks, President Barack Obama on Wednesday slammed a salary cap on top executives from companies that want bailouts — but it's a limit that could end up thinning the wallets of only a small number of people.
Obama's action comes as many Americans, while hanging on for economic life, have watched Wall Street high-flyers receive big-dollar bonuses even as their firms draw public help for survival. The outcry has grown with each report of a bailed-out company that plans to buy a jet or hold a Las Vegas retreat.
The president aimed for a target — extravagant corporate behavior on the public dime — that fit the mood of the day. His $500,000 salary limit on executives from a limited number of companies was part of a broader assault on what he called a "reckless culture" that has helped wreck the economy.
"We don't disparage wealth. We don't begrudge anybody for achieving success. And we believe that success should be rewarded," Obama said. "But what gets people upset — and rightfully so — are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers."
Top business leaders often receive annual packages worth several million dollars, so a $500,000 compensation cap is striking.
Yet in practical terms, the intervention into the corporate world is also limited.
The compensation cap covers distressed companies seeking special bailouts but would not apply retroactively to those that already have received them. What's more, consultants on executive pay say the cap will probably apply only to a few executives — not big-time traders, brokers and salespeople who routinely earn whopping pay packages. And there are sure to be efforts to exploit loopholes as the new rules start to take hold.
Had the salary cap been in place when the $700 billion bailout program began, it probably would have applied only to executives at five companies that have received so-called exceptional help: Chrysler LLC, General Motors Corp., American International Group Inc., Bank of America Corp. and Citigroup Inc.
Going forward, the compensation cap would also apply to other banks that receive more broadly available aid — but they could get around it by disclosing their plans and involving shareholders in the decision. Some 360 companies have received such aid. The cap does not apply to them retroactively, either.