Stringent executive pay restraints in the new stimulus package President Barack Obama signed Tuesday are a foretaste of economy-wide restrictions likely to come out of a US Congress steamed up about the issue, Global Proxy Watch reports.
The Senate supplanted Obama’s $500,000 salary cap with tougher rules that limit all bonus and other payments to a third of an executive’s annual salary at firms receiving bailout money.
U.S. labor and public pension funds now see this as an opening to push for restrictions they have long wanted at all U.S. firms. Among the possibilities: Broadening the 1993 law that prohibits companies from taking a federal tax deduction for executive salaries over $1 million a year. It has been widely criticized for driving up pay by prompting executives to skirt the limit with stock and option grants. One revision would extend the deductibility limit to all forms of compensation.
Another would cap the deductibility of compensation in excess of 25 times the pay of the company’s lowest-paid worker, as advocated by the Income Equity Act of 2007, which failed to pass.