While the stimulus bill passed by Congress Friday didn't end up containing any caps on CEO salaries, a provision, written by Senator Chris Dodd, did make its way into the bill that would impose strict new limits on the bonuses enjoyed by Wall Street executives.
More details from the New York Times:
The provision, inserted by Senate Democrats over the objections of the Obama administration, is aimed at companies that have received financial bailout funds. It would prohibit cash bonuses and almost all other incentive compensation for the five most senior officers and the 20 highest-paid executives at large companies that receive money under the Treasury's Troubled Asset Relief Program, or TARP.[...]
The pay restrictions resemble those that the Treasury Department announced this month, but are likely to ensnare more executives at many more companies and also to cut more deeply into the bonuses that often account for the bulk of annual pay.
The restriction with the most bite would bar top executives from receiving bonuses exceeding one-third of their annual pay. Any bonus would have to be in the form of long-term incentives, like restricted stock, which could not be cashed out until the TARP money was repaid in full.
The Washington Post, which notes that the measures in the stimulus bill go "much further than restrictions proposed by the Obama administration last week," reports that, not surprisingly, Wall Street is worried about how this will affect its ability to retain top executives:
"This is a big deal. This is a problem," said Scott Talbott, chief lobbyist for the nation's largest financial services firms. "It undermines the current incentive structure."
Talbott said banking executives expected certain restrictions would be applied to them but are concerned that some of the most highly paid employees, such as top traders, who bring in hefty sums for the company, would flee to hedge funds or foreign banks that have not accepted U.S. government funds.