The Ultimate Harm of the Pay Czar

by J. Robert Brown, for The Race to the Bottom, December 14, 2009.

The Pay Czar has announced new plans to cut compensation for employees below the top layer of management, the so called “second tier” employees.  The ostensible toughness of the Pay Czar is generally overstated.  Moreover, his impact is a short term palliative that will have no long term effects.

Sometimes reports indicate that the Pay Czar has cut compensation when in fact he’s allowed for an increase in compensation but only cut the salary component.  Thus, published reports indicated that BofA had trimmed the pay of the CFO, Joe Price, to $500,000 because of pressure from the Pay Czar.   Its true that Price had been paid$800,000 in salary the year before.  But his “total compensation” package in 2008 was $4,021,168 (based on the total compensation line for the 2008 proxy statement).  His total compensation for 2009?  Cash of $500,000 (beginning on Nov. 1, 2009) and stock related awards of $5,250,000.  Moreover, as the BofA noted, “Salary Stock Units are paid in cash” and some payments are accelerated if the Company repays its TARP funds…(continue reading)


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