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VOL. 124 | NO. 113 | Thursday, June 11, 2009

US to Issue New Executive Pay Curbs

JIM KUHNHENN | Associated Press Writer

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WASHINGTON (AP) – The Obama administration will give a new U.S. Treasury official power to reject executive pay packages at firms that receive U.S. government assistance and wants legislation that would seek to tame compensation across the corporate world, an administration official said Wednesday.

President Barack Obama will ask Congress to give shareholders a nonbinding voice on executive pay in an effort to link compensation to long-term performance rather than short-term gains, the official said.

Executive pay is a politically charged issue in the U.S. Bonuses totaling $165 million issued by one bailed-out company in March set off a public and congressional outcry.

Obama and his economic team have been trying to temper the populist urge to cap salaries while also trying to make the case that compensation practices contributed to the current crisis by encouraging high risk-taking.

The president also will seek legislation that requires corporate compensation committees to be independent from corporate management. The move would give the U.S. Securities and Exchange Commission authority to strengthen the independence of the corporate panels that set executive pay.

The official spoke on the condition of anonymity because the proposal has not been made public. Treasury Secretary Timothy Geithner was expected to spell out details of the plan later Wednesday.

While the shareholder votes would not be binding, they would shed more light on skyrocketing executive pay and exert pressure on boards of directors. The administration believes the so-called “say-on-pay” plan will make directors more accountable to shareholders.

In anticipation of the new guidelines, Geithner scheduled a private meeting Wednesday with SEC Chairwoman Mary Schapiro, Federal Reserve Governor Dan Tarullo and executive pay experts to discuss compensation policies.

Officials from the Treasury Department, Federal Reserve and SEC were expected to testify about executive compensation on Thursday before the House Financial Services Committee.

Chairman Rep. Barney Frank said the goal is to ensure salaries and bonuses do not encourage industry executives to take big risks.

“We have a ‘heads I win, tails I break even’ compensation system in the financial services industry in America,” said Frank, a Democrat. “Executives have a perverse incentive to expose their companies to more and more risk, but only the shareholders realize the downside of bad bets.”

Those overarching guidelines for the industry come as the administration prepares to issue new, more specific regulations governing pay at financial institutions that have received infusions from the Troubled Asset Relief Program. The regulations, prompted by legislation passed by Congress earlier this year, would limit top executives to bonuses no greater than one-third of their annual salaries.

The administration official also said the administration will appoint a “special master” to oversee compensation at firms receiving large amounts of government assistance. The pay overseer would have the power to reject excessively generous pay plans.

The official said the special master will review the compensation for the top 100 salaried employees at firms that receive exceptional assistance under TARP. Among the companies that could be affected would be Bank of America, General Motors and the American International Group.

The special master is expected to be Kenneth Feinberg, a lawyer who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks.

___

AP Economics Writer Martin Crutsinger contributed to this report.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 82 82 19,655
MORTGAGES 75 75 22,989
FORECLOSURE NOTICES 0 0 8,305
BUILDING PERMITS 138 138 40,167
BANKRUPTCIES 72 72 13,176
BUSINESS LICENSES 9 9 6,146
UTILITY CONNECTIONS 52 52 13,048
MARRIAGE LICENSES 30 30 4,872

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