Limiting Executive Compensation and Lessons Learned from Abroad

by J. Robert Brown, for The Race to the Bottom, December 10, 2009.

As BofA pays off its TARP money, allowing it to avoid the oversight of the Pay Czar and to pay compensation essentially without limits, and Goldman opts to pay compensation that, on the present course, will equal more than $700,000 for every employee, it is clear that the US has done nothing to fix the problem of executive compensation.  It is also clear that public pressure carries little weight in determining these amounts.

The British (with support from the French) have taken steps to fix the problem in the short term.  The British Government announced that it would impose on bonuses above L 25,000 (somewhere around $42,000) paid by banks a tax of 50%.  The tax comes just at the time boards are gathering to decide on bonuses for top officials.  It essentially forces the board to step back and reconsider the amounts that will be paid…(continue reading)

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