MICHELE NORRIS, Host:
In the heated back and forth over the financial bailout, Treasury Secretary Henry Paulson has now agreed that any bill must include a provision to address executive pay. Responding to howls from constituents over massive compensation packages for CEOs at failing companies, lawmakers have demanded strict limits on what the outgoing bosses can take with them. And Paulson has now backed off his fierce opposition to such a provision as long as the program's effectiveness is not undermined. For more now on the effort to cap CEOs' salaries, we're joined with Roben Farzad. He's a senior writer for BusinessWeek. Good to talk to you.
NORRIS: Hi there, Michele.
NORRIS: Now, what do we know so far about the details of this plan to reign in executive compensation?
NORRIS: For example, if one of these banks or corporations is a beneficiary of some of the crumbs of this $700 billion bailout, that at least for two years the CEOs have to give in to very stringent restrictions on compensation. You know, the conventional wisdom was that this just wouldn't fly. If you're going to lard this emergency measure with all these different aspects, it's just going to be too complicated to pass through Congress by Friday. But I think the tone has shifted today and that the administration realizes we have to at least tonally make a concession on this.
NORRIS: Just the CEOs would fall under this cap? Other executives as well?
NORRIS: Other executives as well. Ostensibly CFOs, C-level executives, the board, there would be greater scrutiny on severance. There'd be an element of claw backs if it turns out that one of these companies is helped and we find out later down the line, when a CEO wants to depart with his or her severance, that some of those gains were quote, unquote, "ill gotten." That money can be legally clawed back. But the devil is really in these details, because it's vexingly hard to go back, especially when a company is estranged from its CEO, to get that cooperation, to get the money back. And the record here certainly means...
NORRIS: And to reopen the contract.
NORRIS: Exactly. And it's spotty, but at this point I think it's important to say that this is - there's a lot of electioneering involved in this. And the labor movement in this country very much so has reconstituted itself in terms of shareholder activism. If you look at the AFL-CIO, or the service workers' labor unions, they are on top of all the SEC filings and what certain people are getting paid and tricks of the trade and tucking away money in these little slush funds. So that's actually one big development. We see them really flexing their muscles in this campaign.
NORRIS: Roben, a couple other just very quick questions.
NORRIS: Sure.
NORRIS: Put this in perspective for us. What kind of money are we talking about? How much money were these CEOs of these financial firms making?
NORRIS: On average, the CEOs, I think of the Fortune 500 were making about 13 million last year, and that's double what they were clocked at just 10 years ago. But look, again, the devil is in the details, and it's not so clear-cut. You look at Dick Fuld, the CEO of Lehman Brothers, which just failed last week. In 2007, he took home a Wall Street-leading $45 million. Now, after this bankruptcy, he might be lucky to see 10 of the $20 million he's due in severance. And not to mention the hundreds of millions of dollars that he lost in stock as the stock pretty much went to zero. I mean, it's cold comfort, I think, to get 5 or $10 million. There's the other situation: Jimmy Cayne at Bear Stearns. He lost a billion dollars in the stock collapse.
NORRIS: I've got to let you go, but just one yes or no question. Can they get around this with deferred compensation or alternative compensation?
NORRIS: Absolutely, it's done before. And when you're talking about these numbers, they pay top dollars for lawyers.
NORRIS: Roben, thank you so much.
NORRIS: Thank you, Michele.
NORRIS: That was Roben Farzad. He's a writer for BusinessWeek. Transcript provided by NPR, Copyright NPR.