Confusion Surrounds Government Curbs on Executive Compensation
There has been a great deal of discussion recently on the need to address the widely-perceived problem of executive overcompensation. The recent financial meltdown on Wall Street has intensified this discussion. The federal government recently indicated that banks that accept cash infusions as part of the current financial bailout will be expected to comply with executive compensation provisions, including a “clawback” provision and prohibition on “golden parachutes.” However, a closer look at those restrictions indicates that they are vague in language, and likely limited in scope. The clawback provision, for example, only takes requires a corporate board not to pay a severance benefit if the benefit was based on “materially inaccurate” information. Also, the provisions are not retroactive in scope. A recent article on the government’s handling of executive compensation in its bailout appears here.