President Obama called Wall Street bankers "shameful" after reports that they had given themselves some $20 billion in bonuses this year, just as the economy was deteriorating and the government spending billions to bail them out.
Here's a modest proposal: for companies receiving federal bailouts, let's limit the pay of those CEOs to what the President of the United States earns--$400,000.Once those bailout companies have repaid our tax-paid bailout money, they can return to paying themselves tens of millions of dollars yearly, as they do now.
Indeed, just this week Senator Claire McCaskill (Dem, Missouri) introduced a bill that would cap compensation at $400K for all employees of bailout recipients.
To give you some context, here are the top ten recipients of federal bailout money under the TARP (Troubled Asset Relief Program).
1. Bank of America, $45 billion
2. Citigroup, $45 billion
3. AIG, $40 billion
4. JPMorgan Chase, $25 billion
5. Wells Fargo, $25 billion
6. General Motors, $10.2 billion
7. Goldman Sachs, $10 billion
8. Morgan Stanley, $10 billion
9. PNC Financial, $7.6 billion
10. U.S. Bankcorp, $6.6 billion
And here are the 2007 total compensations for the CEOs of those same firms:
1. Kenneth Lewis, $20.4 million
2. Vikram Pandit, $3.2 million
3. Martin Sullivan, $13.9 million
4. James Dimon, $28.9 million
5. John Stumpf, $11.4 million
6. G. R. Wagoner, $15.7 million
7. Lloyd Blankfein, $54 million
8. John Mack, $41.4 million
9. James Rohr, $14.5 million
10. Richard Davis, $5.9 million
These men are all multimillionaires, even if you only count their take from last year. They can afford to slum it for a while on the salary of the President of the United States. And if these CEOs are genuinely committed to help their companies, and the United States, recover, then they should be willing to forego a little extravagance for a few years. If they are unwilling to do so, then the federal government should appoint a caretaker CEO until the bailouts have been repaid.
The rules of the game have changed. These companies and their CEOs have brought this country to the brink of economic disaster. The government has stepped in to save these companies, as a means of rescuing the economy. There can no longer be any argument that multimillion dollar compensation packages are necessary to attract "talent." It was not true in the past (when CEO salaries were far lower); it is not true in other countries (where CEO salaries are a small fraction of American ones--see chart below); and it is not true now--when this "talent" drove their companies, and the economy, into the ground.
Congress has talked about limiting the pay of bailout CEOs, but they have done nothing about it. It is time. And this idea--of limiting these CEO salaries to the level of the highest paid government executive--was even profferred by Republican John McCain during the campaign:
"no C.E.O. of any corporation or business that is bailed out by us, that is rescued by American tax dollars, should receive any more than the highest paid person in the federal government.”
CEO Pay as a Multiple of Average Worker Pay, in US and Other Countries
(from The End of the American Century, p. 40.