Stricter Pay Limits in Final Stimulus Bill Raises Concerns

February 17, 2009. The new stimulus package passed by Congress on Friday puts greater restrictions on executive pay than President Obama's previous proposal, according to a February 14th article in The Wall Street Journal. Among other things, the bill prohibits any financial institution receiving federal bailout funds from paying bonuses to executives of more than one-third of total annual compensation. Alan Levine, a partner in Morrison Cohen's Executive Compensation and Employee Benefits practice, was quoted in the article, "Bankers Face Strict New Pay Cap" as saying that the bonus restrictions could result in companies shifting more pay for top officials to salaries, and away from incentive-based pay. The pay provisions also permit the Treasury to review all previously paid bonuses to determine whether they were contrary to the stimulus bill or the public interest. If so, the Treasury would seek to obtain repayment. According to the story, the Obama administration is concerned that these stricter rules will prompt banks to return the government's money earlier than appropriate. "The banks] don't want to run their business under these restrictions," said Levine.