CEO Pay Continues to Remain a Hotly Contested Issue on Wall Street

Over the last several years the overall amounts of CEO pay has been rising steadily. Once the current recession and financial crisis began, the issue was brought increasingly to the forefront as those businesses who were seeking a government bailout, showered their executives in lavish pay packages. As a result, the Securities and Exchange Commission (SEC), various state attorney generals and the newly appointed CEO Pay Czar have been aggressively reducing pay packages or filing law suits against those companies who continue to engage in such activities. A recent example of this; occurred when New York Attorney General Andrew Cuomo filed a law suit alleging that both Merrill Lynch and Bank America failed to disclose their pay packages to investors. What happened was; when the merger was taking place between Merrill Lynch and Bank America (because Merrill Lynch was facing bankruptcy); the executives at both companies failed to disclose the overall size of pay packages that were they were receiving. 

In a law suit filed by the New York Attorney General, Bank America stands accused of threatening to walk out of the merger if pay packages were disclosed to investors. This simply was not true, because the federal government had arranged the merger, in which the lawsuit alleges that Bank America manipulated the federal government to save the deal. To make matter more precarious, the company recently settled a lawsuit with the SEC on similar charges for $150 million and with the Attorney General of North Carolina. Under the agreement with the SEC, Bank America agreed to increase its internal controls and to properly disclose all employee bonuses.  While, in the agreement with the North Carolina Attorney General, the company agreed to pay $1 million for various consumer protections.

What this shows; is that for the first time since the Great Depression the federal government is carefully watching the pay packages of those firms who received bail out money. This is significant, because since the 1980's the overall rate of executive pay packages have increase by over 400%. The recent actions by the SEC and various state Attorney Generals, is just the latest in the trend by the different regulators to control the various abuses that occurred during the real estate bubble. As a result, Wall Street executives can expect far more scrutiny of pay and other activities at the various firms; which highlights the government's commitment to preventing the various abuses that have been occurring.