-- High pay and "golden parachutes" for poor-performing executives in finance and other industries still is a big issue, but the bailout bill passed Friday by the U.S. House likely won't rein in overpaid Wall Street moguls.
Compensation consultants who work with companies on pay packages say the bill's sections on executive compensation are so broadly and vaguely written that executives and companies will create dozens of new ways to boost leaders' pay anyway.
"This is tinkering around the margins, without really taking a fundamental look at executive compensation plans," says Howard Sherman, CEO of the Governance Metrics International,
The bill bans golden parachutes for some executives of financial firms involved in the bailout, limits their stock-related pay and allows so-called "clawbacks" — the government can recover pay if executives later are found to have engaged in fraud or questionable actions.
The bill also lowers the cap on federal corporate tax deductions for executives' pay to $500,000 from $1 million. Under the current tax code, companies cannot deduct executives' pay above $1 million, unless the pay is pegged to performance measures such as earnings.
"All the bite has been taken out of the bill," says Paul Hodgson, senior research associate at The Corporate Library, a corporate-governance research firm. "There are so many loopholes."
Business leaders contend that pay limits could scare away top talent from the troubled companies. Bruce Rosten, a U.S. Chamber of Commerce executive vice president, says he wants "the best guy," not an inexperienced CEO, handling billions of dollars in taxpayers' money.
While the bill applies only to financial companies participating in some way in the bailout, pay consultants say that public outrage is likely to lead other industries to curb pay.
"If anything, it will compel other companies to improve their compensation practices," says Shirley Westcott, managing director for policy at Proxy Governance, "because clearly there's a lot of anger on Main Street."
The controversy also will ignite more pay debates during next spring's proxy season, when shareholders battle with companies over boardroom issues.
Last year, the top tier of executives at Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers and Bear Stearns made a total of $613 million, or an average of $123 million for those investment banks, says Graef Crystal, a pay expert and author of The Crystal Report on Executive Compensation. That's three times the average in other industries.