Obama administration discuss corporate pay

WASHINGTON — Talking tough but stepping gently, the Obama administration rejected direct intervention in corporate pay decisions Wednesday even as officials argued that excessive compensation in the private sector contributed to the nation’s financial crisis.

Instead, the administration plans to seek legislation that would try to tame compensation through shareholder pressure and less management influence on pay decisions.

The administration also drew a distinction between the corporate world and those institutions that have tapped the government’s $700 billion Troubled Asset Relief Program.

The administration is ready to issue new regulations governing pay at companies that receive TARP assistance, with the toughest restrictions aimed at recipients of "exceptional assistance,” such as Citigroup, Bank of America, General Motors and American International Group. The regulations, which follow legislation already passed by Congress, would limit top executives at publicly assisted firms to bonuses no greater than one-third of their annual salaries.

The administration has named Kenneth Feinberg, a lawyer who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks, as a "special master” with power to reject pay plans he deems excessive at companies with the biggest injections of public money.

With one set of policies for taxpayer-assisted firms and a more hands-off approach to the rest of the corporate sector, Obama is straddling what has been an explosive issue with the public and in Congress. Executive pay burst as an issue earlier this year amid disclosures that AIG, the insurance conglomerate, had paid bonuses of $165 million even as it accepted billions from the government.

AIG is among the companies whose pay schemes the government will now oversee. But outside in the broader private sector, the administration chose to use public pressure and the potential for embarrassment, rather than direct pay restrictions.

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.



by the associated press