WASHINGTON — There's one thing that angry lawmakers and their constituents agree about the Wall Street bailout being crafted by Congress: Executives at teetering companies the government helps steady shouldn't walk away with millions of taxpayer dollars stuffed in their pockets.
But Washington has tried before to limit the compensation of chief executives. And Wall Street has found ways around it.
Corporate governance experts said they wouldn't be surprised if the armies of lawyers, accountants and executive compensation consultants employed by major corporations again ferret out loopholes in whatever restrictions Congress crafts.
"I'm sure there are probably people working on that right now," said Paul Hodgson, senior research associate for the Corporate Library, a corporate governance research firm. "Undoubtedly, there will be a way around it. There are too many smart lawyers out there."
Although no agreement on the proposed $700-billion bailout had been reached as of late Thursday, House and Senate negotiators earlier in the day said they had reached agreement on several principles. The first one dealt with the salaries of CEOs whose struggling companies would get the money: The Treasury secretary would "set standards to prevent excessive or inappropriate executive compensation for participating companies."
There were no details. But a draft proposal this week from Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, called for a prohibition on severance to senior executives for two years after they participated in a government program to buy up debt-laden mortgage-backed securities, and a provision requiring executives to refund any bonuses or incentives that were paid based on overstated financial results.
President Bush on Wednesday said any bailout "should make certain that failed executives do not receive a windfall from your tax dollars."
But the history of attempts by lawmakers to corral CEO pay has shown it's difficult to accomplish -- and sometimes can have unintended consequences.
In 1984, Congress tried to limit executive severance by adding what was known as the "golden parachute" provision to the tax code. It changed Internal Revenue Services rules so that any payment more than 2.99 times an executive's annual salary was subject to a 20% excise tax.
