WASHINGTON — Assailing out-of-touch corporate pay and perks, President Barack Obama on Wednesday slammed a salary cap on top executives from companies that want bailouts — but it's a limit that could end up thinning the wallets of only a small number of people.
Obama's action comes as many Americans, while hanging on for economic life, have watched Wall Street highfliers receive big-dollar bonuses even as their firms draw public help for survival. The outcry has grown with each report of a bailed-out company that plans to buy a jet or hold a Las Vegas retreat.
The president aimed for a target — extravagant corporate behavior on the public dime — that fit the mood of the day. His $500,000 salary limit on executives from a limited number of companies was part of a broader assault on what he called a "reckless culture" that has helped wreck the economy.
"We don't disparage wealth. We don't begrudge anybody for achieving success. And we believe that success should be rewarded," Obama said. "But what gets people upset — and rightfully so — are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers."
Top business leaders often receive annual packages worth several million dollars, so a $500,000 compensation cap is striking.
Yet in practical terms, the intervention into the corporate world is also limited.
The compensation cap covers distressed companies seeking special bailouts but would not apply retroactively to those that already have received them. What's more, consultants on executive pay say the cap will probably apply only to a few executives — not big-time traders, brokers and salespeople who routinely earn whopping pay packages. And there are sure to be efforts to exploit loopholes as the new rules start to take hold.
Had the salary cap been in place when the $700 billion bailout program began, it probably would have applied only to executives at five companies that have received so-called exceptional help: Chrysler, General Motors, American International Group, Bank of America and Citigroup.
Going forward, the compensation cap would also apply to other banks that receive more broadly available aid, but they could get around it by disclosing their plans and involving shareholders in the decision. Almost 360 companies have received such aid. The cap does not apply to them retroactively, either.
Obama's new plan is broad.
Beyond imposing tighter rules on companies that get emergency bailouts, it also requires more openness and limits for healthy banks that tap into public money to expand lending. And it envisions broad reforms in how employees are paid at any public financial institution, even ones that don't get federal help.
The new treasury secretary, Timothy Geithner — confirmed last week despite controversy over his own tax problems — said the raft of new policies is intended to restore the public's trust.
"There is a deep sense across this country that those who were not responsible for this crisis are bearing a greater burden than those who were," he said in announcing the details with Obama.
According to a New York Times analysis, among the perks currently lavished on executives: country club dues, gym memberships, personal assistants, home security systems, chauffeur service and parking. And, of course, all those private jets.
It's not just big banks. Small and midsize banks lavish perks on their executives, too, and often sweeten salaries and bonuses with fringe benefits.
• Bank of the Ozarks in Arkansas, which received $75 million in taxpayer money, paid $43,400 in 2007 for a personal assistant to coordinate business and charitable events from the home of CEO George Gleason.
• International Bancshares of Texas, which accepted $216 million of taxpayer money, picks up the tab of shuttling its chief, Dennis E. Nixon, and his family on a corporate jet.
• Of 200 of the largest publicly traded banks that have received taxpayer money, about 61 percent, or 121 banks, paid an average of $10,835 in country club dues for their CEOs in 2007.
• Nearly three-quarters, or 147 banks, spent an average of $20,668 in car and parking expenses. Corporate jets, now one of the biggest targets of Washington's ire, were financed by 36 banks, or 18 percent of those now receiving taxpayer funds. More often than not, the banks let their leaders use the corporate jet for personal travel, at an average cost of $102,216.
Information from the Associated Press and the New York Times was used in this report.