WASHINGTON — The White House is charging forward with plans to clamp down on executive pay, framing the measures as necessary to rein in risky business practices and brushing aside claims that it is meddling too deeply in corporate affairs.
The measures announced by the Obama administration Wednesday include a “pay czar” to approve compensation packages for the highest-paid employees at Bank of America, AIG and other large recipients of bailout funds, and support for legislation to give company shareholders a bigger voice in compensation issues.
The actions continue a strong Obama administration theme of active involvement in corporate America, leading to objections from some Republicans and business groups that the government is overstepping its role.
“They’re bootstrapping the problem in the financial-services sector to all companies,” said Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents large financial companies. “It’s a slippery slope.”
But others say the proposals don’t go far enough toward reducing corporate compensation and the incentive for executives to take risky paths to fatten their paychecks.
House Financial Services Committee chairman Barney Frank, D-Mass., said Wednesday he wanted to pass legislation with even tougher restrictions.
Steps announced by the Obama administration:
• Having “special master” Kenneth Feinberg sign off on pay packages for senior executives and the next 100 highest-paid employees at seven companies that have received “exceptional assistance” from the government, such as AIG.
• Limits on bonuses and severance packages at other bailout recipients.
• Limiting bonuses to one-third of total compensation for senior executives at bailout recipients.
• Limits on the use of compensation based on sales commissions and on so-called golden-parachute severance packages, and requirements that bonuses given to senior executives based on performance criteria that later turn out to be inaccurate be repaid.
• And tying incentives to long- term performance to reduce short- term risk-taking.
While those principles would also apply to all private companies, Treasury Secretary Timothy Geithner will be working with federal regulators to have them enacted for banks and financial institutions.
“We had a financial crisis which, although it was caused by many things, there were clearly some aspects of compensation which contributed to the kind of risk-taking we saw across the financial sector,” Geithner said.
Kenneth Feinberg file
Career highlights:
• Fund administrator, Hokie Spirit Memorial Fund
• Special master, 9/11 victims fund
• Founded Feinberg Group in 1993 after 13 years as a law partner
• Served as a law clerk, assistant U.S. attorney and special counsel to the Senate Judiciary Committee
