Having called it "shameful" that some companies who received federal bailout funds continue to shower their executives with expensive bonuses, President Obama will announce a plan today that would limit executive pay in such companies. Under the plan, executive salaries would be capped at $500,000. Any bonuses would have to come in the form of company stock that could not be sold until the bailout money is paid back.
This call for limits on executive pay comes on the heels of some shocking revelations. Wall Street executives received a total of $18 billion in bonuses in 2008. Also, it was discovered that Citigroup, which has accepted $45 billion from the government, was having a new $42 million private jet delivered. Citi scrapped the jet plan after the embarrassment.
One key thing to remember is that these new restrictions on executive pay will only affect companies that receive federal bailout money going forward. There will be no limits on executive salaries for companies who do not receive future bailout funds; however, companies that are already receiving money through the TARP program will be subject to enhanced transparency and oversight rules.