US: US proposes law to control corporate pay
11 Jun 2009 3:24 AM
WASHINGTON, June 10 AFP - US President Barack Obama's administration unveiled plans on Wednesday for legislation to give authorities and shareholders the means to control bonus payments to executives of listed firms.
The move followed a public outcry earlier this year after big companies, which had received huge public bailouts, made large bonus payments to top executives amid the worst financial crisis in decades.
Treasury Secretary Timothy Geithner said the administration would work with Congress to pass legislation giving the Securities Commission powers to require firms to give shareholders a "non-binding" vote on compensation packages.
It would also propose legislation giving the SEC powers to ensure that committees deciding on compensation in companies were "more independent, adhering to standards similar to those in place for audit committees."
At the same time, Geithner said, compensation committees would be given the responsibility and the resources to hire their own independent compensation consultants and outside counsel.
Geithner stressed the authorities were not putting limits on salaries but wanted to develop a benchmark rewarding innovation and what he called "prudent risk taking."
"I want to be clear on what we are not doing. We are not capping pay," Geithner said in a statement.
"We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive.
"Instead, we will continue to work to develop standards that reward innovation and prudent risk-taking, without creating misaligned incentives."
In February, the administration reacted angrily to massive bonus payments for some executives by saying senior officers of firms getting taxpayer bailouts would have total annual compensation capped at 500,000 dollars.
An Obama administration official said a new pay czar, to be known as a "special master," would be appointed with powers to reject salary plans, from firms getting taxpayer help to ward off the financial crisis, if they were deemed "excessive or inappropriate."
