Administration Takes Aim At Executive Pay

(AP)  The Obama administration, which partly blamed out-of-whack executive pay for the nation's financial crisis, says it won't try to directly limit such pay, choosing instead on Wednesday to try to tame compensation through shareholder pressure.

Treasury Secretary Timothy Geithner said the administration will ask Congress to give shareholders a nonbinding voice on executive pay and to require corporate compensation committees to be independent from company management. That second provision would give the Securities and Exchange Commission authority to strengthen the independence of panels that set executive pay.

Separately, the administration is preparing to issue new, more specific regulations governing pay at financial institutions that have received infusions from the $700 billion Troubled Asset Relief Program. Those regulations, following legislation already passed by Congress, would limit top executives at these companies to bonuses no greater than one-third of their annual salaries.

An official 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 issue of executive pay has raised a strong populist cry, especially after the economy began stumbling in 2007 and stocks were falling. Lawmakers have remained attuned to it, particularly after American International Group in March announced bonuses totaling more than $165 million.

As for the goal of the legislative efforts announced Wednesday, Geithner said that "we'd like to see better transparency and accountability, frankly" of executive pay practices.

He said the efforts would reinforce administration compensation guidelines, released Wednesday, that encourage corporate boards to adopt pay packages that reward long-term performance rather than short-term gains and to better manage the relationship between risk and incentive. Those guidelines, or principles, are not enforceable but are meant as a message to corporate boards and to shareholders.

"We are not proposing an ongoing government role in setting policy in compensation," Geithner said. "We do not believe it's appropriate for the government to set caps in compensation. We're not going to prescribe detailed prescriptive rules for compensation. All those things would be ineffective, could be counterproductive in some ways."

Regarding the regulations that are still to come, an administration official said the special master will review 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 Corp. 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. Feinberg attended Wednesday's compensation meeting with Geithner. Also there were Securities and Exchange Commission chair Mary Schapiro and Federal Reserve Governor Dan Tarullo.

The administration is to release the TARP-related regulations this week that stem from legislation Sen. Chris Dodd, D-Conn., inserted as an amendment to the economic stimulus package earlier this year. Besides the provision limiting bonuses, it would require the treasury secretary to seek reimbursement of any compensation paid to a TARP recipient's top 25 employees if Treasury deemed the payments contrary to the public interest.

On Thursday, officials from the Treasury Department, Federal Reserve and Securities and Exchange Commission are expected to testify about executive compensation before the House Financial Services Committee.

Committee Chairman Barney Frank, D-Mass., said the goal is to ensure salaries and bonuses don't 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. "Executives have a perverse incentive to expose their companies to more and more risk, but only the shareholders realize the downside of bad bets."

So-called shareholder "say on pay" legislation cleared the House in April 2007 by a 2-to-1 margin but went nowhere in the Senate. It was opposed by the Bush White House and most Republicans.

Investor advocates, union pension funds and shareholder groups have pushed for the legislation.

As a senator in 2007, President Barack Obama introduced a bill to require companies to allow nonbinding shareholder votes on executive compensation packages, though his proposal wouldn't have limited CEO pay.

During the presidential campaign, Hillary Rodham Clinton also proposed a measure to give shareholders a nonbinding vote on executives' pay packages. In addition, her bill would have required top executives who collect large performance-based pay packages to return the money if financial irregularities are discovered and companies are forced to restate their earnings. It also would have capped the amount that top executives could earn tax-free through deferred compensation.

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

Sen. Frank Lautenberg, D-N.J., encouraged Geithner to act. "We've got to change corporate culture that says the leadership at the top can often take its compensation without regard for what happens with the employees or the future investing or the well-being of the company and taxpayers," he said.

[omega39-2009]

The US president is paid $400k+/year ........ I wonder if they'll start with that EXECUTIVE PAY?
Posted by tiredofthebs

Thanks for pointing out that the most powerful position on the planet pays just a fraction of what the CEOs and board members believe that their compensation should be.

[perk235]

Does it have controlling interest in them? also note freedom has changed I guess now we are free to not fail
Posted by alanrobisch at 3:26 PM : Jun 10, 2009
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Yes, and that's the problem. Companies and banks were not regulated and allowed to make enormous risky bets (derivatives) that can cause systemic failure. When one large risky bet goes south, then the domino effect is too great for all the other connected players. So, to keep up the whole house of cards, they're not allowed to fail and we, the taxpayer, are rewarding them for their greed.

[perk235]

If I am a doctor and my business makes 1 million that is I pay .......275k for ins, 5 employess avarge income 48k x 5 is 240k. Your a doctor so you work 70 hours a week x 50 weeks you now make 485,000. les 45% tax you now make 266,750. Take in 70 hours x 50 weeks is a total of 3500 hours a year divide that by 266,750 you now make $76.21 per an hour. Please dont forget that he is still carring 375K in student loans at 6.5% he still has to pay. What is 1 million
Posted by dwilson59 at 6:32 PM : Jun 10, 2009
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Not many physicians are solo practitioners in private practice. Physicians in private practice join together to share employee and other costs. Drive around your city and you'll find that physicians are still living in the large hosues in gated communities. I'm not saying that they shouldn't be, but they are able to sustain a good lifestyle even with the cost of doing business.

[perk235]

This is government RUN AMOK!!! It is so sad to see how our great nation is sliding down into the deep hole of socialism/communism/fascism. It will take us 25 years to undo all the damage that Obama has done to our nation.
Posted by randomlybanned at 6:54 PM : Jun 10, 2009
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That's a pretty wide range of "isms" in this list.

What we have is private profits and social debts. Private companies and management made extreme profits and salaries, but when things turned downside, the taxpayers are bailing them out. Years of deregulation and astounding greed have caused the current economic tsunami.

[Ned_C]

CEO and executive "compensation" is looting. It is done under the guise of capitalism when it is really nothing more than criminal racketeering. A CEO pays, in reality ?pays-off?, the board of directors (CEOs of other companies) with large annual sums of cash each year to sit in a few meetings and vote each other tens and hundreds of millions of dollars a year in compensation. This procedure for stealing is protected by our laws. It?s a rigged, formally documented, proceduralized process for stealing on a grand scale by the rich. The rich use their money to ?support? politicians who won?t outlaw this kind of thievery. Unregulated and uncontrolled capitalism is the way rich people transfer wealth from the many to the few. The list of CEO and executive forms of stealing is only virtually unlimited and mostly hidden. Insider trading, fraudulent annual reports, fraudulent accounting practices are the tip of the iceberg.
When a common criminal robs a convenience store our police rightfully go after them. If caught, they are prosecuted and punished because that kind of stealing is against our laws. But CEOs are allowed to steal by the millions, if not billions, because we have no laws against the way they stealing.
Our political leaders need to stop worshipping business people and recognize the CEO and executive ?compensation system? for what it really is: massive stealing.
Corporate governance is an oxymoron. Shareholder voting should be as anonymous and transparent as the voting for our political leaders. Shareholders don?t vote because they know their votes are known to people in power.
New laws need to be enacted that gives our government the authority to DISGORGE past ill-gotten gains from the rich. Our government should be able to go back twenty years and disgorge stolen money from these greedy thieves.

[alphaa10]

THE GOP CONSPIRACY AGAINST UNIONS

GOP poster said, "Toyota and GM sell the same number of cars in a year. GM is going broke and Toyota is fine. Toyota employees make a very nice living and will probably be working this summer. What is the one difference between the 2 companies......UNIONS!!!"
---

Not really, and here are the facts. America owes its prosperity and its middle class to decades of union membership by Americans. The GOP war against unions puts downward pressure on wages and threatens destruction of American middle class prosperity. Quite simply, middle class real income has made no gains over the last decade because little of the money is being shared by management.


A LIVABLE WAGE--
A livable wage is the real issue-- a wage that lets a union family buy the house in about 30 years, affords medical care and lets the kids attend college, if they wish.

And yes, that costs money which upper management never has liked to share with fellow workers.

What is a livable wage? For the auto industry, UAW wages average $28 hourly, not the untruth about $73 hourly the GOP floated just before its election defeat. The non-union worker at an American plant of Honda or Toyota makes up to $26 hourly.

And UAW wage scales let UAW hires start at $14 hourly. entirely in line with current labor rates.


THE TRULY UNSUSTAINABLE COSTS--
Here is another and more pointed question about wages-- have we heard the GOP and Mitch McConnell or the sages of Faux News condemn American executive pay scales? Not until Wall Street burned down, we haven't. Yet, average CEO pay at a large American corporation is around $12 million, versus only $1.2 million for a comparable CEO in Japan.

Moreover, Wall Street-style perks have been the rule for more than two decades (and are directly responsible for widespread damage to shareholder value and assets). Yet, little unrest about executive pay from the same people now complaining about union hourly wage or national competitiveness.

When Bank of America distributes $4 billion in bonuses to executives after a year of disaster, that dramatically defines the "dent in national competitiveness" the GOP wants to blame on union wages.

This dual standard-- or call it the hypocrisy it is-- about union wages vs. executive pay runs deeply in the GOP, as well as circles of the American Enterprise Institute, and Cato and Hoover Institutes.


WAGE AND SOCIAL EQUALITY IN OUR HISTORY--
In fact, unions have helped maintain the American standard of living. Robert Reich explains the radical concentration of wealth just before the Great Depression probably helped create that epic economic disaster. Not surprisingly, only when unions began to flourish in the 1930's did wealth begin to reach more Americans.

Unions made a massive contribution to American prosperity, putting wages where millions of workers could enjoy a middle-class living. And by so doing, unions undersigned this country's claim of upward mobility. Without unions, we would lack the American middle class we so often take for granted.

Likewise, were it not for unions, millions of sharecropper black American families in the South would have had no economic future but as slaves of the Jim Crow system. Unions are also a boon to Hispanic Americans, which may account for much of the current GOP animosity against unions.

Finally, the GOP canard about union wages symbolizes the hypocritical stance of the party about Detroit. GOP spokesmen say nothing about Detroit perks, limousines, redesigned offices, golden parachutes or corporate jets, but love to sing false choruses about union wages and health care costs.

MARC AMBINDER'S DILEMMA--
Recently, CBS outsourced political commentary to a GOP-oriented writer named Marc Ambinder, While Ambinder repeatedly cites the UAW as "arguably" one of the factors of Detroit demise, he does not discuss how closely UAW hourly wages tracked other workers at other auto plants across the USA. That simply would not conform to his rant about the UAW.

Nor does Ambinder explain how Detroit's executive culture of multiple billions in perks, options and salaries for the corporate elite should be omitted from his rogues' gallery of Those Responsible.

Nor does he explain how such egregious excess by Detroit executives contributed even a penny to net productivity gains by UAW line workers making SUVs for those with money to burn.

Or why UAW workers should be blamed for the repeated failure of GM management to anticipate the future, technical and otherwise, with all due diligence for the stockholder money with which they were entrusted.

Ambinder should recognize Detroit management-- not labor-- dropped the ball by making SUVs for as long as the party lasted-- all, rather than act with the reason, responsibility and expertise for which they were hired and paid.

As Barney Frank so famously asked Wall Street bankers, "Why do you have to be bribed to align your interests with your employers?"

[randomlybanned]

"The US president is paid $400k+/year ........ I wonder if they'll start with that EXECUTIVE PAY?"

Fat chance of that happening!!! Plus the libs were pushing for Michelle to get a paycheck as well.

[tiredofthebs]

The US president is paid $400k+/year ........ I wonder if they'll start with that EXECUTIVE PAY?

[JanaBrad]

I hear Katie Couric's ratings are lower than they have ever been. Good. I stopped watching the CBS News because I just can't stomach the liberal bias. Now I tune into Fox. I know the network is conservative, but compared to CBS, ABC and NBS & MSBS, their news coverage is pretty balanced. It's no wonder Fox News continues to grow, while the other networks are shedding viewers. People are tired of being spoon-fed the liberal line. This is the first time I logged onto CBS in months. It's as bad as I recalled. If Ms. Couric wants her ratings to grow, she might consider taking a refresher course in basic journalism.

[jweller51]

If the government would tak a pay cut themselves, then that would cut the budget alot!
Cut back on number of people in offices to three, no 30-day vacations. Let them work for a change.