Americans have been particularly sensitive about the salaries of executives during the past five years. Recently, the U.S. Treasury Department was criticized for approving salary pay-raise requests for 18 executives that worked at American International Group, Inc., General Motors Corp., and Ally Financial, Inc. – all companies that are receiving taxpayer-funded bailouts.
The raises for executives ranged anywhere from $100,000 to $1 million; and certain corporate packages totaled $5 million or more for close to a quarter of the executives at these companies. An official with the Troubled Asset Relief Fund (TARP) was quoted as saying: “Treasury cannot look out for taxpayers’ interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits.”
TARP has put forth a number of guidelines as pertain to executive pay. One such guideline includes a provision about compensation not exceeding 50 percent of pay for executives in other financially distressed companies not receiving taxpayer funds. Yet pay levels at the companies mentioned above surpassed that level for more than half of the executives in question.
Businesses need to take care that no appearance of impropriety occurs when it comes to salaries and benefits for executives. It would be a mistake for these companies to wait for governmental officials to notify them that federal guidelines are being exceeded. Federal officials and the public can turn on corporations very quickly and leave the business entangled in a series of legal battles.
Every company should heed the advice of a competent business and commercial law attorney to prevent litigation from occurring to begin with. These attorneys can review every single aspect of corporate policy to insure that laws are complied with, and there is no adverse publicity that will disrupt business due to companywide practices.
Source: Connecticut Post, “Report: Gov’t allowed high pay at bailed-out firms,” by Marcy Gordon, Jan. 28, 2013
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