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Capping CEO Pay, Only The First Step

Wednesday, 4 Feb 2009 | 6:10 PM ET

Capping executive pay is getting all the attention, but did you know it’s just a first step?

As we’ve been telling you President Obama has imposed $500,000 caps on senior executive pay for the most distressed financial institutions. The pay cap would apply to institutions that negotiate agreements with the Treasury Department for "exceptional assistance" in the future. (We take that to mean banks that need additional TARP money.)

But that’s just a first step. The president is also considering a wide range of other new requirements on "exceptional assistance." They include:

_The expansion to 20, from five, the number of executives who would face reduced bonuses and incentives if they are found to have knowingly provided inaccurate information related to company financial statements or performance measurements.

_An increase in the ban on golden parachutes from a firm's top five senior executives to its top 10. The next 25 would be prohibited from golden parachutes that exceed one year's compensation.

_A requirement that boards of directors adopt policies on spending such as corporate jets, renovations and entertainment.

The administration also will propose long-term compensation restrictions even for companies that don't receive government assistance, Obama said.

Those proposals include:

_ Requiring top executives at financial institutions to hold stock for several years before they can cash out.

_ Requiring nonbinding "say on pay" resolutions — that is, giving shareholders more say on executive compensation.

_ A Treasury-sponsored conference on a long-term overhaul of executive compensation.

Read More:

> Obama Caps Executive Pay Tied to Bailout Money


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AP with CNBC.com

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