New conditions have been proposed by the Obama Administration on banks which have already received Federal bailout funds and which apply again in the future for additional Federal Taxpayer Funds. One such proposed condition would be for those Banks to agree to a nonbinding vote of Shareholders on whether certain Bank Officers would receive stock awards as a part of their compensation.
According to a Wall Street compensation consulting firm, some 60% of executive compensation is already paid in the form of stock shares. The Financial Services Roundtable, a bank and financial corporate lobbyist, has gone on record against the proposal nonetheless. The Roundtable says that the new conditions "could have negative long-term effects." These proposed conditions, according to the Roundtable, could discourage public corporations in need of further money, from asking for it from the Federal Taxpayer. Financial Services Roundtable Press Release, "Executive Compensation for TARP Recipients is Measured" (February 4, 2009).
If it were in the interests of the shareholders to apply for Federal bailout funds, but the corporate Officers decided not to apply for those funds because the Officers did not want to accept the condition of a non-binding shareholder vote on the Officers' stock awards, would the Officers then not be preferring their own interests, to those of the shareholders? A Fiduciary however is required to put the interests of the party for whom she or he is acting, above self-interest. Interesting issues.
For more on the non-binding shareholder vote on stock awards, and on other conditions on the further release of Federal Taxpayer Funds to those who apply for them, see Stephen Labaton and Vikas Bajaj, "Executive Pay Limits Seek to Alter Corporate Culture" p. A1, col. 5 (New York Times Nat'l Ed., Thursday, Feb. 5, 2009).
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