Academic

Are the Pay Caps a Joke?

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

Yes, says Joe Weisenthal, along with some experts.  I'm not so sure, though Vic's possible workarounds suggest that, as with taxes, it's more possible to avoid putatively tough, but possibly only symbolic, government rules than you'd think.  First, the good news for senior executives: it's not a retroactive freeze, restricted stock options aren't covered by the cap, and most bailed out firms can avoid caps by getting shareholder approval to do so.

However, the "guidelines" we've seen so far (and maybe Treasury has a more formal document out there, but it's not up on the web yet) provide:

Some people think that the term "senior executive" only applies to the CEO and not star traders.  But I'm not so sure.  The question is whether star traders, many of whom carry the job title "vice president," or "head of global derivatives," are "executives" or not.  "Senior executive" is defined by the statute by compensation, not position:

So I'm not sure that these guidelines might not have at least a little bite, at least with regard to the second $350 billion of TARP money, in that they'll require embarassing say on pay procedures ... or one of Vic's workarounds.

Full post as published by Conglomerate on February 05, 2009 (boomark / email).