PRESIDENT BARACK Obama has condemned as “shameless” and “irresponsible” the payment of almost $20 billion in bonuses on Wall Street as business leaders meeting in Davos signalled a major overhaul of executive pay.
The New York State comptroller reported this week that financial executives had received an estimated $18.4 billion in bonuses for 2008, as the US economy deteriorated and hundreds of thousands of Americans lost their jobs.
“That is the height of irresponsibility,” Mr Obama said. “It is shameful and part of what we’re going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility.”
Mr Obama’s administration wants to impose stricter limits on executive pay as it prepares to disperse the second half of a $700 billion rescue package for financial institutions. Reports that banks used the earlier bailout to pay for bonuses, executive perks and to fund acquisitions have caused a furore in the US as American companies continue to announce massive layoffs.
Senior executives meeting at the World Economic Forum in Davos said yesterday that firms were looking at far-reaching changes aimed at reducing the incentive for bankers to take high risks in the hope of boosting year-end bonuses.
One option under consideration is to introduce a mechanism that allows banks to spread bonuses over a number of years and potentially claw back money already paid.
“You are going to see a move where the overwhelming majority of those individuals is paid in deferred stocks or other deferred methods,” NYSE Euronext chief executive Duncan Niederhauer told Reuters.
“It gives the company the ability to have a clawback mechanism that does not exist today.”
Former president George Bush issued guidelines last October to try to control executive pay at companies receiving government help, but so far they have had little effect. Mr Obama said his administration was determined to rein in bonuses at companies that receive part of the next bailout.
“And so we’re going to be having conversations as this process moves forward directly with these folks on Wall Street to underscore that they have to start acting in a more responsible fashion if we are to together get this economy rolling again,” he said.
“There will be time for them to make profits, and there will be time for them to get bonuses – now is not that time.”
