Obama: "Transparency and Accountability" For Executive Salaries

President Obama today called for "transparency and accountability" when it comes to the salaries and bonuses of executives.

During a press conference in London after the G20 Summit, Mr. Obama was asked by a reporter from the Australian Broadcasting Corporation who should determine the compensations for executives – the companies' corporate boards or the government.

"Theoretically, that should be the shareholders," Mr. Obama said.

The president pointed to a bill he touted while he was a senator that would subject executive compensation to a shareholder vote, even if it was non-binding, "so that there was transparency and accountability and perhaps a shame function that would take place."

Mr. Obama stated clearly that he doesn’t believe government should set salaries.

"It doesn't mean the state micromanaging… It doesn't mean that we want the state dictate the salaries," he said. "I strongly believe in a free-market system… I think, people understand in America at least, people don't resent the rich; they want to be rich. And that's good. But we want to make sure that there's mechanisms in place that holds people accountable and produces results."

He also said that the current system creates problems, however.

"The way that too many corporations have operated for too long is that you have a CEO who basically selects his board,” he said. “The board, in a fairly cozy relationship oftentimes with the executive, hires an executive compensation firm, which surprisingly tends to think that it's necessary to retain the best talent to pay people $20 million or $30 million a year… And we -- we get into the kinds of habits and practices that I think have -- have not been -- have not served shareholders well, I think ultimately distort the decision-making of many CEOs."

The president also related this to his meetings with fellow world leaders at the G20, pointing to the guidelines set forth during the summit.

"That principle, I think, is reflected in these guidelines. What it says is… if you get shareholders involved and those shareholders are given a set of principles and best practices by which they can judge executive compensation, then you can still have outsized rewards and success for successful business people, but it'll be based on not short-term performance, not three-month performance, not your ability to flip quick profits off products like derivatives that don't turn out to be particularly productive to the company, but based on sustained effective growth," he said. "And I think that you're going to see a lot of countries trying to encourage that kind of transparency and accountability."

More Coverage Of The Press Conference:

Obama: G20 Summit Marks "Turning Point"

Obama: Open To Suggestions For Catchphrases, Sound Bites

President Offers Condolences To CBS News Correspondent

Full Transcript

Full Coverage Of Obama's Trip Abroad