Congress Amends Executive Pay Limit
With the ongoing financial crisis which left companies scurrying for government financial assistance, President Barack Obama proposed a salary limit for top executives of struggling firms. But because his proposal has loopholes, including the million-dollar bonuses to executives, Congress also limit such financial reward by requiring employers to give only a maximum of one-third of the amount of the executives’ annual salary.
US Congress proposed a plan that will further limit the salary of executives working in struggling companies which have received financial aids from the government.
Few weeks ago, President Barack Obama recommended to Congress the executive pay limit that will allow recession-hit companies to cut cost. But because the plan does not include long-term restricted stock bonuses worth millions of dollars, lawmakers proposed another restriction for this reward that requires employers to give only a maximum of one-third of the amount of the executives’ annual salary.
The Congress also requires restriction to any kind of bonus payment and reward for companies until all the debts from the government has been paid. Another mandatory provision is the "Say on Pay" which requires shareholders to vote every year on how much should executives receive.
Meanwhile, some financial experts warn that stringent executive pay limit will have negative ramifications to some companies as top talents will be forced to leave their position.
On February 4, Obama ordered executive cap for companies which received federal assistance to keep its economy afloat, saying that this move is not only “necessary” but also pure “common sense”. The salary limit will only be applicable for struggling firms under Troubled Asset Relief Program (TARP).
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