Wednesday, March 26, 2008

OMB Revises Executive Comp Limit on Federal Contracts

The Office of Management and Budget announced that the maximum permissable amount of government contract which can be used for compensation of top [5] executives is $612,196 per executive, up about $14,300 or 2.5% from the prior year. It should be noted that this is the maximum federal contract amount used for compensation, not an actual ceiling on executive comp. The cap number has been in use for over a decade and is accepted by even the Professional Services Council (PSC). Alan Chvotkin, general counsel for PSC, is markedly less enthusiastic about detailed compensation disclosures on companies with over 80% of revenues coming from federal contracts (minimum level of contracts of $5 million).

The cap on executive compensation from government contracts is probably valid as a means of protecting taxpayers from excessive executive compensation out of taxpayer funds. Congressman Murphy's 2007 Government Contractor Accountability Act (requiring disclosure of executive compensation) is a tougher idea to evalaute; it provides disclosure on top executives but seems inconsistent with privacy laws of the U. S. Constitution.


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