Executive pay scandal continues-Obama administration steps in to save top American companies and their CEOs
A year after the massive bailout initiated by the American goverment to save wall street’s banks comes the pay cut scandal. On Oct 22 the Obama administration announced that its “payback” time for a small group of Wall Street executives. The pay of 25 top-level executives each at 7 banks which received the maximum amount of the bailout will be cut by arount 50 percent.
The administration had a lot to say, and they needed to as its a bit hard to digest - “the goverment capitalising on the capitalists”, isn’t it so? Some said that “the executive bonuses have been cut in order to keep the companies “viable.” & some were of the opinion that “the principal reason for the cuts is not to punish capitalists, but to rescue and save the bailed-out capitalist giants from their own CEOs on behalf of the stock holders.”
The seven co’s affected are Citigroup, Bank of America, AIG, General Motors, Chrysler, GMAC and Chrysler Financial.Citigroup CEO Vikram Pandit made $10.82 million in 2008, while the company received $45 billion from the government. Bank Of America’s CEO Kenneth Lewis is stepping down at the end of 2009 amid BAC’s horrid run in the last two quarters. Lewis has made headlines by proclaiming he will not take a salary for 2009, yet he will still walk away from Bank of America, which received $45 billion in bailout funds, with a retirement package worth $125 million. There were rumours that Goldman Sachs & JP Morgan had cleared out their account with the administration, but it is entirely unclear, however they have escaped this one.
Its not an argument entirely against the administration, what needs to be seen here is that yes capitalists need to make profits but not at the expense of workers.The administration is just trying to redirect workers’ very correctly placed anger at those who run the capitalist system. Obama made it very clear right from his first day that without disturbing the economic model of the country, he will make sure that supernormal or abnormal profits(including extraordinary pay packages for CEOs) do not become a case in every other Wall Street company.