Obama to detail compensation limits on executives

WASHINGTON -- Call it the maximum wage. President Obama wants to impose a $500,000 pay cap on executives whose firms receive government financial rescue funds, a dramatic intervention into corporate governance in the midst of financial crisis.

The new restrictions, described by an administration official familiar with the new rules, are to be announced Wednesday morning at the White House. The steps set the stage for the administration's unveiling next week of a new framework for spending the money that remains in the $700 billion financial rescue fund.

"If the taxpayers are helping you, then you've got certain responsibilities to not be living high on the hog," Obama said Tuesday.

The official, speaking on the condition of anonymity because the plan had not yet been made public, said the most restrictive limits would apply only to struggling large firms that receive "exceptional assistance" in the future. Healthy banks that receive government infusions of capital would have more leeway.

Firms that want to pay executives above the $500,000 threshold would have to compensate them with stock that could not be sold or liquidated until they pay back the government funds, the official said.

The president and members of Congress have been weighing various proposals to restrict chief executives' compensation as one of the conditions of receiving help under the $700 billion financial bailout fund. The desire for limits was reinforced by revelations that Wall Street firms paid more than $18 billion in bonuses in 2008 even while struggling with the economic downturn.

Banks and other financial institutions that receive capital infusions, but are considered healthy, could waive the $500,000 salary cap and the stock restrictions under the new Obama rules. But the companies would have to disclose the compensation and submit the pay plan to shareholders for a nonbinding vote.

The administration will also propose long-term compensation restrictions even for companies that don't receive government assistance.