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Column: The coronavirus bill is a big step toward stimulus that helps you, not corporate bigwigs

Michael Hiltzik, Los Angeles Times on

Published in Business News

This could be a major safeguard to keep taxpayer funds from being diverted into the pockets of an administration that has set new standards for official turpitude.

Big businesses that accept bailouts from the $500 billion bailout fund will have to accept mandates on how they spend the money. They'll be barred from staging share buybacks or paying dividends until one year after the bailout funds are paid back.

They'll also have to commit to maintaining until Sept. 30 the same employment levels in place on Tuesday "to the extent practicable," but in any event barred from cutting employment by more than 10%.

The measure includes other provisions aimed at encouraging businesses to avoid layoffs. These include a credit against payroll taxes (that is, Social Security and Medicare taxes) based on an employer's continuing payroll, and a program of loan forgiveness for small business loans, that borrow, chiefly through the Small Business Administration, taken out by employers who keep their workforces in place.

--The bad: The bill incorporates limits on executive compensation at companies accepting bailout funds, but they arguably don't do much to rein in excessive pay. That's an issue, because previous bailouts have been used not to retain rank-and-file workers or make productive investments in business, but to fatten the paychecks of top executives.

No employee of a bailed-out company earning more than $425,000 in 2019 (except those who receive the pay through a union contract) would be eligible for a raise or a golden parachute -- that is, severance -- worth more than twice their 2019 compensation.

 

Those earning more than $3 million, however, would be eligible for raises worth half of their 2019 compensation in excess of $3 million.

"The failure of Senate leaders to secure meaningful CEO pay limits helps nobody except top executives," said Sarah Anderson, executive compensation analyst at the Institute for Policy Studies.

As Anderson calculated, the rules might force businesses to pare their CEOs' compensation, but only from elevated levels. If American Airlines CEO Doug Parker, who earned $12 million in total compensation in 2018, got the same last year, he'd be eligible for $7.5 million this year, Anderson calculated. If Delta CEO Edward Bastian got the same $15 million last year that he received in 2018, he'd still be in line for $9 million this year.

The limits on compensation would apply to most companies until one year after the bailout is repaid. For airlines, which will be in line for a special $50 billion loan program, the ban would last for two years, or until March 24, 2022.

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