Word: compensationitis
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For those that survive the turmoil and layoffs still to come, the future may not look like the halcyon days of the past—heavy deleveraging threatens to cut into profits, and Congressional leaders are already clamoring to include limits on executive compensation in the proposed bailout plan in...
Treasury Secretary Henry Paulson had been warning that such measures could prevent companies from participating in the program, but on Sept. 24 he relented in the face of political pressure. "The American people are angry about executive compensation, and rightfully so," he told the House Committee for Financial Services. "We...
But Congress should be the first to know that dictating what executives can get paid doesn't always work as expected. In 1984, Congress passed a law eliminating the tax deductibility of golden parachutes that exceeded three times base salary. Corporate America took that to mean anything below that multiple...
There has also been mixed success with legislating clawbacks. The Sarbanes-Oxley Act, passed in 2002 in the wake of accounting scandals at Enron and other companies, required CEOs and CFOs of companies that have to restate earnings because of financial misconduct to pay back bonuses and incentive compensation. But...
Researchers at Harvard Business School studied the British system and found that it achieved one of its major goals - reducing big paydays at companies that aren't doing well. That was especially true at firms handing out the most compensation, a particularly relevant finding considering the size of some Wall...