Golden Parachutes, Even For Bailed-Out Execs, Are Alive And Well

Thought everyone might find this interesting. Apparently 'Golden Parachutes' haven't been ruled out for failing or failed institutions:

To summarize this, the executives can get a huge bonus or salary or golden parachute, all they have done is not make it tax deductible if it is over $500,000. They still get to pay them. There is an excise tax on the exec.

• Treasury announces executive compensation rules under bailout programs
• Treasury Release 2008-10-14-9-5-0-19994

As discussed at the recently enacted Emergency Economic Stabilization Act (Act) included a host of new tax compensation rules for companies participating in the various bailout programs authorized by the Act. A new Treasury release announces the development of three programs under the Act and corresponding executive compensation and corporate governance standards. These standards generally apply to the chief executive officer, chief financial officer, plus the next three most highly compensated executive officers. The release indicates that additional guidance concerning the new tax rules will be forthcoming from IRS. A description of the three programs and the associated tax restrictions follow:

Troubled Asset Auction Program. The release states that Treasury is continuing to develop a program to purchase troubled mortgage-related assets through an auction format, and will be issuing program guidance for this program in the coming weeks. In the meantime, it is issuing guidance for the executive compensation requirements that will apply to firms participating in this program. As prescribed by the Act, any financial institution that sells more than $300 million of troubled assets to the Treasury via an auction is prohibited from entering into new executive employment contracts that include golden parachutes for the term of the program. Treasury is releasing Treasury Notice 2008-TAAP regarding this restriction. Furthermore, under the Act, (1) the financial institution may not deduct for tax purposes executive compensation in excess of $500,000 for each senior executive, (2) the financial institution may not deduct certain golden parachute payments to its senior executives and (3) a 20% excise tax will be imposed on the senior executive for these golden parachute payments. IRS has issued a notice on these new tax rules, see _¶ 18_ .

Capital Purchase Program. The release reveals that Treasury is issuing guidance for this program designed to provide equity capital under standardized terms directly to certain financial institutions, further strengthening their capital structures to facilitate their continued lending in the capital markets. Any financial institution participating in the Capital Purchase Program will be subject to more stringent executive compensation rules for the period during which Treasury holds equity issued under this program. The financial institution must meet certain standards, including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate; (3) prohibition on the financial institution from making any golden parachute payment to a senior executive based on the Internal Revenue Code provision; and (4) agreement not to deduct for tax purposes executive compensation in excess of $500,000 for each senior executive. IRS will be issuing interim final rules for these executive compensation standards.

Programs for Systemically Significant Failing Institutions. Treasury is developing this program to potentially provide direct assistance to certain failing firms on terms negotiated on a case-by-case basis. Treasury is issuing guidance for the executive compensation standards that will apply to the firms participating in such programs and their senior executives (Treasury Notice 2008-PSSFI). These standards are similar to the Capital Purchase Programs executive compensation standards described above, with one significant difference--golden parachutes will be defined more strictly to prohibit any payments to departing senior executives.

*Source: Federal Taxes Weekly Alert, 10/16/2008, Volume 54, No. 42*

Go figure, that's Washington for you.

Comments

[bernusdellus]

Ever since I was a kid in shorts I've seen the way the world works. Our local police sargeant would come round every friday afternoon to get his 'gratuity' for forgetting about my dad's high volume car conversion and gangland operation.

Every level of every enterprise has its criminal opportunities. In fact, the guy with a gun in your face on the subway isn't a criminal..­. He's failed at real crime and now he's just a poor beggar with a gun.

By the time you get to the top of the corporate, banking and investment world, the criminals ARE the establishment.

Why are golden parachutes here to stay? Why do the companies fight as hard to pay them as the departing execs do to get them? Easy.

In order to be Chief Executive Criminal of a large investment house, you have to know exactly whats going on in the business. When you're fired, what gives you the generous impulse to keep these goings-on a secret? Especially when you've probably got the goods on so many fellow criminals that you could either have them all thrown in the slammer OR live for 1000 years on blackmail payoffs?

Why, a nice 10, 20 or 50 million dollar parting gift says so much. After receiving one of those, it would be positively rude to blab to the feds.

Who needs to join the Foreign Legion to forget? Just like my dad's sargeant, corporate CEOs find that money is the best amnesiac.

[Sagantech]

Wall street bankers are walking away with our money. I will not vote for anyone who voted for this wall street bailout. Although highly unlikely, I am looking forward to seeing these criminals prosecuted. To get real info on this stuff we have to look to other countries to provide us with unbiased news.

http://www.guardian.co.uk/business/2008/oct/17/executivesalaries-banking

[leftLibertarian]

But Nancy Pelosi said that wouldn't happen!!!

LOL

Fooled again by the gutless Democrats.

[Michale32086]

Anyone know if there is a "golden parachute" out there so people like me don't lose our homes???

Silly question..­..

Michale...­.

[psanchez90210]

when do we all get out mini-golden parachute?

...oh is that what's coming 5 years from now?

[AnotherMcIntosh]

Many voters would also be surprised that corporations which ship jobs overseas can still get tax breaks for doing so.

[KillTheMessenger]

A golden parachute is a contract between two legal entities, a corporation and an individual. I do not see any legal way to limit the scope of these contracts. Not unless you want to throw a good 1000 years of contract law under the freight train. And I seriously doubt that you will find any court which will help with that one.

[schatsie]

If we are going to bail these people out, you are darn straight that we get to call some shots!

The corporation no longer has the assets to throw money at these Wizards of Wall Street and now they are expecting us to bail them out, get it???

I agree that the Supreme Court will take the Corporations/ Wealthy side.... But you know, they take to the streets in FRANCE and by gum with all the out of work people in this country we can take to the street also.... All I can say is that if you respect the constitution and this country, you must vote for Obama!

[Michale32086]

So, why were Democrats in favor of this bail out??

And, I thought the bail-out was supposed to HELP things.

Stocks are still tanking..

What's up???

Michale...­..

[Rule Of Law]

Why were the Republicans for it--in fact, why did they turn down the first proposal and stuff this one with neo-con pork and then vote for it........­..Oh, wait, I answered my own question.

[Michale32086]

Actually, you got it wrong..

First off, the Republicans were against it initially.

Then Democrats loaded it up with PORK for Democrats and PATRIOT ACT carp for Republican­s...

So, in short.. Democrats conspired with Republicans to screw over the American Public and protect and bail out the VERY people who caused the problems in the first place.

That's the difference between you and me.. I want to hold EVERYONE accountable, whether they be Dem or GOP.

You just want to score political points against the GOP..

Michale...­.

[KillTheMessenger]

The bailout was not supposed to help the stock market.

Do you expect your house to look green after you threw six buckets of blue paint at it?

[Michale32086]

@KTM

I know that the bail out wasn't for the expressed purpose of helping the stock market..

However, I got the impression that, if the bail out DIDN'T go thru, the stock market would tank...

The bail out DID go thru and yet, the stock market STILL tanked..

I admit, I don't know squat about economics.­. I simply think that the bail out didn't really help anything..­.

Michale...­..