While the American Recovery and Reinvestment Act signed by President Obama on Feb. 17 aims in part to appease the furor over excessive pay for the financial services executives who engulfed the world in economic turmoil, the $787 billion package also serves as a warning to all companies, especially their board compensation committees, to re-evaluate their own executive pay structures. "They would be smart to behave like they, too, are under the gun," says Alexander Cwirko-Godycki, research manager at Equilar Inc., a Redwood Shore, Calif.-based compensation research firm.

"Absolutely obscene," is how David O'Brien, former director of treasury operations at Fidelity Investments, describes the bonus bonanza in financial services. "These firms have senior managers making tens of millions of dollars who failed miserably in doing their jobs. This was supposed to be `pay for performance.' These people drove their companies into the abyss. I see the `pay,' but where was the `performance?'" says O'Brien, now president of treasury management consultancy Enlightening Enterprises.

The new legislation imposes stiff restrictions on firms that have deposited federal TARP (the $700 billion Troubled Asset Relief Program passed in September) dollars, prohibiting cash bonuses and incentive compensation (other than restricted stock) for the five most senior officers and the 20 highest-paid executives. Until the banks and insurers like American International Group (AIG) have repaid all the money owed, they are barred from awarding bonuses exceeding one-third of the annual cash compensation of the 25 top executives, a group that would likely include CFOs, treasurers and other finance professionals.