Excessive CEO Pay Takes a Hit

October 23, 2009

moneyThe culture of executives taking excessive pay has suffered a puncture wound.  Word from Washington that new limits are being placed on compensation at financial institutions which took taxpayer bail-out money was welcome to most average Americans.

On average, pay for the top 25 employees at those firms will be halved, though some particularly large cuts – Bank of America’s outgoing CEO Ken Lewis, who requested as much as $11 million this year, won’t get any salary or bonus for 2009, for instance – dramatically skew that figure. The firms taking the cuts are Bank of America, Citigroup, General Motors, Chrysler, the insurer AIG and auto financiers GMAC and Chrysler Financial.  Still, some execs still managed to squeak by with their bonuses.

Not everyone is happy about this small dose of justice.  Some warn that limiting executive pay will lead us to a dangerous case of brain drain, sending the very talent needed to re-build these businesses elsewhere. But seriously, come on. Where are they going to go? The days of execs padding each others pockets by sitting on their buddy’s company’s Board of Directors have been outed.  Shareholders are wise to the old you scratch my back, and I’ll scratch yours shenanigans that became so common at big corporations.

One serious question, though, remains.  Will a real overhaul of the nation’s troubled financial system follow, or is it destined to disappear in the dust of flashy headlines over executive pay? NPR correspondent Liz Halloran takes a look at whether the focus on CEO pay and bonuses will just serve to paper over bigger problems.  Click here to read her article.