Will the bailout have any impact on executive pay?

06.10.2008
The proposed US$700 billion federal bailout of the financial services industry that the House and Senate passed and signed this week has shined a spotlight on .

Treasury Secretary on September 19, 2008. Ever since, Americans have over footing a bill for what they perceive as a financial crisis brought on by greedy executives who profited while leading their firms to ruin. Taxpayers' anger, along with pressure from Congressional leaders, forced Paulson to address compensation for executives at the firms being bailed out in his proposal. The Treasury Secretary initially resisted making executive pay restrictions a condition of the bailout.

The question is: Do the restrictions on that legislators added to the bailout bill, also known as the Emergency Economic Stabilization Act of 2008, go far enough? Or will executives find ways to capitalize on loopholes, as they did with limits on CEO pay that were written into bankruptcy laws in 2005?

Sarah Anderson, director of the Global Economy Program at the think-tank , says the bailout's provisions on executive pay have both strengths and weaknesses. Anderson sees the restrictions on and caps legislators placed on corporate income tax deductions as positive steps. But she also believes the law gives too much power to Paulson, a former CEO of Goldman Sachs, to define excessive pay. The bottom line is that many executives may still walk away from this crisis with millions of dollars in their pockets.

CIO.com and the Institute for Policy Studies took a look at the bailout bill's fine print to see exactly what it says about and to find out if it will have any real impact on executive pay at the firms being bailed out.

What the Bill Says