U.S. Government Announces Broad Pay Limits on Banks, Wall Street Firms

Executive compensation, previously the domain of boards and shareholders, is now under greater governmental control. Yesterday, the U.S. government announced aggressive regulations on executive compensation at banks and Wall Street firms.

Here are some links, excerpts, and a video:

AP: Government tells seven firms to slash executive pay

US unveils broad effort to limit executive pay — (AP)

The Treasury Department ordered seven big companies that haven’t repaid their government bailout money to cut their top executives’ average total compensation — salary and bonuses — in half, starting in November. Under the plan, cash salaries for the top 25 highest-paid executives will be limited in most cases to $500,000 and, in most cases, perks will be capped at $25,000.

Fed Hits Banks With Sweeping Pay Limits — (Wall Street Journal)

The crackdown is likely to influence how financial firms pay top executives, traders, loan officers and others whose actions could threaten the soundness of the institutions. Compensation experts said it would be hard for companies to escape the new oversight, though individuals could do so by jumping to hedge funds, private-equity funds and other financial firms beyond the reach of the new curbs.

Pay cuts at bailout companies: a real-life test case — (Christian Science Monitor)

The decision by Kenneth Feinberg, the Obama administration’s “pay czar,” to slash executive compensation at America’s seven biggest “bailout” companies is good politics. But is it good business?

The country will find out as Mr. Feinberg tests vogue ideas about pay and corporate governance in his laboratory of business guinea pigs: AIG, Citigroup, Bank of America, General Motors, Chrysler, and the two automakers’ financing arms.

(The nation’s central bank, the Federal Reserve, will meanwhile police pay policies to discourage the kind of risk taking that contributed to the financial collapse.)

Curbing Wall Street Pay, and the Corporate Boards That Set It — (Economix – NY Times Blog)

To their credit, the new pay rules attempt to incentivize long-term decision-making by requiring more pay in company stock. The measures also to try to ratchet down overall pay levels. Compensation packages for the highest earners, on average, are expected to be down 50 percent.

But the problem with the new measures is they appear to paint America’s pay problems with too broad of a brush. “It looks like meatball surgery with a sledgehammer,” Brian Foley, an independent compensation consultant told The New York Times on Wednesday. Wall Steet pay is not one-size-fits-all.

Tags: corporate governance, executive compensation, executive pay, Fed, u.s. government, wall street