I am a retired corporate lawyer who typically represented banks, investment banks and mega-corps. I know and understand the type of schemes they devise. Accordingly, here are some of my suggested strings on any corporate bailout.
1. No more stock buybacks;
2. No golden parachutes and retention payments (if bankruptcy);
3. Limits on total executive compensation;
4. Executive compensation clawbacks;
5. Employee representatives must control board of directors;
6. Any business applying/receiving a bailout must publicly release its financials;
7. Any business which has ownership where one or more entities owns more than 5% of the company cannot get a bailout unless the financials/tax returns of said greater than 5% owners are publicly released, Reason is that the bailouts are essentially going to said owners. Could exempt businesses/owners where the bailout is less than a threshold amount, say $500,000. This would exempt small businesses, e.g., small locally owned hotels/motels/restaurants while requiring disclosure for larger businesses, e.g., Wynn casino and hotel. Steven Wynn is a multi-billionaire — we should not be socializing risk to bail him out.
8. Executive compensation should be limited based on a multiple of what the lowest paid employee gets (lets say 50 times). No executive bonuses until bailout is repaid. Also restrictions on dividends until the government gets paid back;
9. Government must acquire most favored equity interest as well as common stock. For example, Ford family owns less than 2% of Ford common stock but controls company through ownership of Class B stock. If the taxpayer is going to bail out, the common and any superior equity, whether another class of common or preferred;
10. The CFPB should have a seat on the board and the power to veto any extraordinary transactions;
11. Require a permanent massive increased in reserves and capital, not just financial institutions but all public companies and all private companies over a certain size, which reserves can only be tapped for circumstances such as we are facing. No corporate raiding and then raiding reserves, e.g., pension reserves;
12. Any recipient of a bail out that is later acquired by a hedge fund/raider/etc. cannot have debt over a certain percentage – ask Senator Warren for advice on this; and
13. CRIMINAL LIABILITY FOR DIRECTORS AND EXECUTIVES.
To answer all of the potential objectors who will proclaim how this is all so unfair, tell them that the unfettered hand of the free market is the alternative. Bailouts should be focused on helping people. And if need be, the government can step in, seize control of company and wipe out shareholders and large creditors. We should protect small creditors so, for example, stationery suppliers, janitorial services (unless large companies such as Aramark), local sandwich shops, etc.
I would propose that all bailouts be accompanied by the requirements above, as well as others, and that, where applicable, the requirements should be reflected in the entity’s articles or certificate of incorporation, etc., with any amendment or deletion requiring the consent of the government, say the CFPB. Adding requirements to the bylaws is not sufficient, bylaws are too easily amended. All of these provisions should survive a minimum of ten years after bail-out is repaid, plus interest.
Please feel free to add, modify, critique and/or send to your senator and representative.