"Say On Pay" Gets Boost from Wall Street Mess

Last Updated Sep 22, 2008 3:01 PM EDT

golden_parachute.JPG"Say on Pay" initiatives are likely to get renewed momentum thanks to the Wall Street meltdown.

Some sort of new limitations are pay could be included in the $700 billion bailout program proposed by the Bush Administration.

Leading Democrats Barney Frank, head of the House Financial Services Committee, and Christopher Dodd, chairman of the Senate Banking Committee, are insisting that executive compensation limits be included in the bailout scheme.

In fact, a battle over compensation could end up being the sticking point this week as Congress considers the program. Treasury Secretary Hank Paulson led efforts to create the program which would give him or his successor tremendous power to purchase bad debt. Yet the document outlining the proposal is very sparse and includes few details about how the program would operate.

Democrats in Congress appear willing to go along with some version of the plan, but have complained about its lack of detail and the fact that it doesn't address executive compensation.

Meanwhile, another bill awaits action on "Say On Pay" which would give shareholders the right to weigh on compensation proposals. Drafted in part by Democratic presidential candidate Barack Obama, the plan passed the House of Representatives but awaits action in the Senate.

Since Republican presidential candidate John McCain supports the law, some version is almost certain to pass next year. The Wall Street debacle will only make its chances better.

Examples of a pay crackdown are now showing up. The heads of failed Fannie Mae and Freddie Mac had been promised exit pay of $12.9 million, but federal regulators who have taken over the firms have deleted them.

And, to his credit, Robert Willumstad, former head of American International Group, another bailout beneficiary, has said he will not take the $22 million due to him as part of a severance package. Willumstad says that doing so would be unfair to the shareholders who have lost heavily in AIG's demise.

Here's to Willumstad, who has done the decent thing.

(Image by Spoiltcat via Flickr, CC 2.0)