More pay may provide bonus loophole

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Steve Chiotakis: Financial companies that took federal bailout funds agreed to play by the rules. That includes limits on executive pay and bonuses. But as it turns out, some of them are reportedly looking for loopholes. From North Carolina Public Radio, here’s Marketplace’s Janet Babin.

Janet Babin: One way to get around limits on bonuses is to increase an employee’s regular paycheck. The Wall Street Journal reports that Citigroup, Morgan Stanley and other financial institutions are looking into doing just that. The paper reports that Wells Fargo has already increased top executive salaries.

The proposed government rules could limit bonuses to a third of an executive’s pay. So increasing base pay would make it easier to up bonuses, too. The argument for salary flexibility is that financial firms need to keep top talent if they want to pay back those borrowed taxpayer dollars.

But that could be a tough sell these days when outrage over the use of federal funds for things like bonuses is at an all-time high. The Treasury Department is expected to release guidelines for executive pay, including bonuses, by the end of the month.

I’m Janet Babin for Marketplace.