US government seeks to rein in executive pay
Democrats want to push administration on US corporate pay strategies
WASHINGTON (AP) -- The Obama administration is taking a half-step toward taming U.S. executive pay. Some lawmakers prefer a fuller stride.
Democrats on the House Financial Services Committee said Thursday the administration's efforts to hector the private sector into reining in executive pay might not go far enough.
The administration contends that excessive compensation contributed to the U.S. financial crisis, but rejects direct intervention in corporate pay decisions.
Instead, the administration plans to seek legislation that would try to rein in compensation at publicly traded companies through nonbinding shareholder votes and less management influence on pay decisions.
"I do differ with the administration in that hope springs eternal and their position seems to be that if we strengthen the compensation committees we will do better," said the committee chairman, Rep. Barney Frank, a Democrat.
Rep. Brad Sherman, a Democrat, said that instead of giving shareholders a nonbinding voice on pay, their votes should be binding on boards of directors.
Democrats and administration officials agreed that companies across the private sector need to adjust compensation practices to avoid damaging the economy.
Gene Sperling, a counselor to Treasury Secretary Timothy Geithner, said administration guidelines call on all publicly held companies to link compensation to long-term performance, not short-term gains.
"We believe that compensation practices must be better aligned with long-term value and prudent risk management at all firms, and not just for the financial services industry," Sperling said.
The committee also heard from officials from the Federal Reserve and the Securities and Exchange Commission.
While the administration has approached the issue with caution, a top Republican said the plans amounted to "incessant government intervention."
"The president cannot continue his heavy-handed meddling in the private sector and expect it to function, much less flourish," said Rep. Tom Price, chairman of the Republican Study Committee.
Alabama Rep. Spencer Bachus, the top Republican on the committee, added: "We need to get government out of businesses."
The administration has drawn a sharp line between the overall corporate world and those institutions that have tapped the government's $700 billion Troubled Asset Relief Program.
On Wednesday, it set pay limits on companies that receive TARP assistance, with the toughest restrictions aimed at seven recipients of "exceptional assistance." They are Citigroup Inc., Bank of America Corp., General Motors Corp., Chrysler LLC, American International Group Inc., GMAC LLC and Chrysler Financial.
The regulations limit top executives of companies that receive TARP funds to bonuses of no more than one-third of their annual salaries.
The administration named Kenneth Feinberg, a lawyer who oversaw payments to families of Sept. 11, 2001 terrorist attack victims, as a "special master" with power to reject pay plans he deems excessive at the seven companies with the biggest injections of public money. Feinberg also would have authority to review compensation for the top 100 salaried employees at those companies.
http://finance.yahoo.com/news/Administration-Rein-in-pay-apf-15500519.html/print
Checkmate.
