New York – President Bush took aim Wednesday at lavish salaries and bonuses for corporate executives, standing on Wall Street to issue a warning for corporate boards to “step up to their responsibilities” and tie compensation to performance.
Bush’s “State of the Economy” speech was aimed at bringing his economic message out of the shadows of the Iraq war. On his second day in a row focused on the economy, the government reported faster-than-expected growth of 3.5 percent in the final quarter of last year.
The president acknowledged people’s continuing nervousness about their financial picture despite a string of similar reports that provide some reason for optimism. He said some workers are being left behind in the booming economy and the disparity between the rich and poor is growing.
“The fact is that income inequality is real. It has been rising for more than 25 years. The earnings gap is now twice as wide as it was in 1980,” Bush said, adding that more education and training can lift salaries.
The president spoke to business leaders at Federal Hall. Later, he stopped along Broad Street to shake hands with New York police officers and then ducked inside the New York Stock Exchange.
In his address, Bush said enormous salaries and other perks for CEOs create anger and uncertainty that affect the country’s investors. The president does not endorse any government role in reducing those packages. Instead, he highlighted new federal rules that the administration thinks are a better path toward wise compensation.
“Government should not decide the compensation for America’s corporate executives,” he said. “But the salaries and bonuses of CEOs should be based on their success at improving their companies and bringing value to their shareholders.”
The rules give investors access to clearer and more detailed information from public companies on their top executives’ pay packages and perks. Their impact will become apparent as corporations begin issuing 2006 annual reports.
“America’s corporate boardrooms must step up to their responsibilities,” Bush said. “You need to pay attention to the executive compensation packages that you approve. You need to show the world that America’s businesses are a model of transparency and good corporate governance.”
