Obama Administration Wants to Regulate Executive Pay

by Damozel | According to The Wall Street Journal:

The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter.

The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance.

Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively.

President Barack Obama and Treasury Secretary Timothy Geithner have both blamed the way banks structured compensation plans for contributing to the financial mess. In February, Mr. Obama said executive pay helped lead to a "reckless culture and a quarter-by-quarter mentality that in turn helped to wreak havoc in our financial system."...

In an indication of how broad the effort may become, Federal Deposit Insurance Corp. Chairman Sheila Bair said regulators need to examine compensation practices in the mortgage industry, suggesting new limits could stretch beyond banks (More....).

Think the banking industry will push back?  I think so too.

Despite the banking industry's weakened state, it would likely try to push back against curbs on how financial firms can compensate people. Bank executives have complained to federal officials that strict rules could prompt some of their best employees to move to parts of the financial industry that aren't regulated, such as hedge funds, private-equity firms and foreign banks. They've also argued that paying substantial bonuses is integral to how the industry works.  (More....)

Deb Cupples, my coblogger, has repeatedly set out arguments in favor of placing some restraints on management compensation --- and not just in the banking industry.  Here's a sampling of her comments on how excessive executive compensation is draining taxpayer and shareholder wealth out of the system and into the pockets of a few private individuals. 

Smoke & Mirrors: Health Care Industry Offers to "Stem" Price Increases?  (May 12, 2009)

Laughing Them Out of the Bank: Citigroup Wants to Give Bonuses?   (April 30, 2009)

If Govt. Can Reduce Auto Execs' s Pay, Why not Bank Execs'? (April 28, 2009)

Cleaning up Political & Corporate Culture Could Help our Economy (December 27, 2008)

Real Executive Bonuses Based on Fake Profits  (December 12, 2008)

Save Jobs by Cutting Executive Pay  (October 31, 2008)

Lehman Execs Re-Distributed Billions in Shareholder Wealth to Themselves (October 7, 2008)

Executives Took Home Millions While Driving Companies (and our Economy) into Ditch (October 5, 2008

Comments

[Brenda Bowers]

I think the banking industry will push back but I don't know just how much they can do because Obama wants total control of the financial industry. He has already signed an agreement for an International Financial Regulatory Agency when he was at the G20 Conference. This move then fits right in with his plans for his one world currency and one world Government. BB

[Steve B.]

I'm sorry but the Liberals can hammer the Conservative wingnuts and financial elite all they want (as of late many of them deserve it) but if even they can't see that this is crazy they're as mindless as all the sheep that supported Bush. Obama is doing the same damn thing Bush did by capitalizing on peoples fear to blatantly increase the scope of government control in the name of "security". If anyone can honestly argue that it's ok for Big Brother to control the compensation of firms that never even got bailed out they need to get their head checked! Better yet read the book Atlas Shrugged then tell me it doesn't look eerily similar to society now.