Page last updated at 17:56 GMT, Wednesday, 4 February 2009

Obama unveils executive pay cap

President Obama: 'We're demanding restraint in exchange for Federal aid'

US President Barack Obama has announced a $500,000 (355,000) limit on executive pay at US firms that need substantial fresh government aid.

The move follows widespread public anger over the levels of pay on Wall Street, but is not expected to be applied retrospectively.

President Obama said it was "shameful" that top bankers had awarded themselves giant bonuses last year.

He added that taxpayers should not be "subsidizing excessive compensation".

'Justify expenses'

In addition to the limit on basic pay, Mr Obama said if affected executives receive any bonuses, it "will come in the form of stock that can't be paid up until taxpayers are paid back for their assistance".

Firms will also have to publicly disclose "all the perks and luxuries bestowed upon senior executives, and provide an explanation to taxpayers and to shareholders as to why these expenses are justified".

"We're asking these firms to take responsibility, to recognize the nature of this crisis and their role in it," said the president.

Analysts said the plan could raise the likelihood of senior executives moving from firms who need government aid to those that don't.

"There is certainly a possiblity of talent flight from the big firms to the smaller investment banks," said Lauren Smith, analyst at Keefe, Bruyette & Woods.

'Take responsibility'

"We all need to take responsibility," said President Obama.

"And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses."

According to the available figures, US banking bosses received bonuses of more than $18.4bn last year.

Some, such as those at Citigroup, also tried to continue to spend on executive luxuries despite receiving government aid.

Citigroup was criticised for attempting to buy a new $50m executive jet after receiving $45bn in taxpayer bail-out cash under the Treasury's Troubled Assets Relief Program (TARP) $700bn financial bailout fund.

Republicans have supported the move to limit the pay of executives at firms that secure fresh government money.

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