Obama to set executive pay limits

By Jeff Mason

WASHINGTON (Reuters) - President Barack Obama kicks off a campaign on Wednesday to rein in corporate compensation with rules limiting executive pay to $500,000 a year for companies getting taxpayer bailout funds in the future.

Obama, who sharply criticized Wall Street chiefs for accepting billions of dollars in bonuses last year while the economy staggered toward collapse, had promised compensation reform as part of a package of stricter regulations on the financial industry.

The restrictions are a first step in a broad effort to overhaul pay practices and are likely to be popular with average Americans, potentially diverting attention from Tuesday's shock withdrawal of former Senator Tom Daschle's nomination to lead Obama's bid to expand healthcare insurance.

Obama and senior congressional Democrats are also seeking to push through an economic stimulus package of almost $900 billion despite Republican criticism that it focuses too much on government spending and not enough on tax cuts.

An Obama administration official said the new rules would require companies that get exceptional government funds in future to abide by the cap.

Additional compensation must be limited to restricted stock that does not vest until government money is paid back with interest, according to the new rules.

Companies that have previously received bailout money -- such as financial giant Citigroup and insurer AIG -- would have to agree to stricter oversight and prove they have followed already established limits on executive compensation, which are widely seen as being too lax.

The White House aims to hold banking executives accountable for the government money they receive, presenting the new rules as being in the interest of shareholders and taxpayers alike.