Several years ago in this space, I chastised Disney Corp. for awarding a severance package of $140 million to its former president, Michael Ovitz, after his disastrous tenure at the entertainment conglomerate. Ovitz, the founder of the powerful Creative Artists Agency, served just 14 months at the helm of Disney, where he somehow avoided being slapped with a loitering citation after accomplishing exactly nothing.In any event, the Disney shareholders perceived his parting proceeds as so obscene that they filed suit in a Delaware court.
I'm sure that, like me, many of you have experienced similar feelings about the mind-numbing salary and annual bonus packages heaped on various Wall Street and banking executives. Therefore, I was somewhat intrigued when President Obama uncorked a $500,000 pay cap on top financial executives at companies that receive federal largesse in the form of a bailout.
According to the proposal, new corporate applicants for federal bailout money must agree to the half-million ceiling on pay, and any additional compensation they receive must come in a form that will not become vested until the federal money has been repaid to the taxpayers - if it ever is. There's also an expansion of the ban on "golden parachutes" awarded to the number of departing executives from five to 10.
The president excoriated Wall Street executives for showing "the height of irresponsibility" as legions of Americans were actually bearing the burden of their incompetence and failures. "We all need to take responsibility," the president said.
I'm wondering if modestly compensated folks like myself are to be included in that "we."
But critics claim that the president's sweeping plan is not without potholes and unintended consequences.
First, under the salary cap regulation as it stood at press time, executives at companies that have already received bailout help will not have to make compensation changes. Top executives at the companies that have already fed at the Treasury trough - AIG, Chrysler, General Motors, Citigroup - make comfortably in excess of $500,000.
Secondly, what will probably happen is a chasm will begin to widen between "government" companies/banks that stick their hands out for assistance funds and those that don't. The ones that do will quickly see their rising young executives begin to bail en masse from those firms in search of higher compensation. As one GOP congressman put it, "There's a cost to be paid when you invite the 800-pound gorilla of government into your boardroom."
While viscerally it probably feels just to cap executive salaries for companies taking taxpayer money, the proposal cries for more long-range scrutiny.
Unless, of course, you're referring to a Disney executive who fled with $140 million.
