Rules For The Splurge
Tom Brokaw asked Hank Paulson on Meet The Press (I microblogged it here) what rules should be put in place for the splurge (that's my new favorite term for the wall street bailout). Hank was good at making the point that we need to act now, but he really punted on the rules that should be put in place. He acknowledged that rules and reforms are needed, but he wanted to stay on message and he did a good job of that.
Fortunately my friend Tom Evslin has come up with a set of rules for brokerages/banks/insurance companies that want to avail themselves of splurge-related bailouts. If, for some reason, you don't want to click thru to Tom's post, here they are:
Rule #1: Cut salaries now
Part of the bailout bill ought to be that any organization which proffers securities for government purchase must agree not to pay any employee or contactor more than $1 million per year for the next four years. No cheating with trips to events on the corporate jet or other perks with draconian penalties TO THE RECIPIENT for violations.
Rule #2: No new golden parachutes
Some executives have contracts which entitle them to huge golden parachutes – especially if their pay is cut. These need to be annulled.
Rule #3: End payment on old golden parachutes
Payments on existing golden parachutes should be stopped.
Rule #4: No dividends for a year
This seems harsh to us shareholders who may have bank securities in our portfolio, but it's not. Clearly an organization which is being bailed out needs to conserve cash to survive.
I like these rules. I bet you all have ideas for more. Please leave them in Tom's comment thread if you can.