Would you take a pay cut?

On Wednesday, President Obama announced a salary cap of $500,000 for top executives at companies that receive large chunks of money from the stimulus package. His action came partly in response to reports that Wall Street executives had received $18 billion in bonuses as the economic meltdown was unraveling.

Americans are sick and tired, Obama said, of seeing Wall Street executives come to the government "hat in hand when they were in trouble, even as they paid themselves customary lavish bonuses."

"This is America, and we don't begrudge wealth," the President said. But Americans definitely begrudge "executives being rewarded for failure," especially if their earnings are subsidized by taxpayers, he said. Under these rules, executives of companies getting bailout money will also be prohibited from receiving bonuses above their base pay, except for normal stock dividends.

There were already cries of unfairness.

"That is pretty draconian--$500,000 is not a lot of money, particularly if there is no bonus," James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. "And you know these companies that are in trouble are not going to pay much of an annual dividend."

Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms. While few IT executives get anywhere near the $500,000 a year in compensation, this new requirement certainly should get executives attention. And it may be part of a belt-tightening plan to cut executive pay by 5 percent, 10 percent or even more. What do you think?

For more on pay cuts:
- check out the New York Times article

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