The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said.
The outlines of the plan are expected to be unveiled this week in preparation for President Barack Obama’s first foreign summit meeting in early April.
Increasing oversight of executive pay has been under consideration for some time, but the decision was made in recent days as public fury over bonuses has spilled into the regulatory effort.
The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could range beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.
One proposal could impose greater requirements on the boards of companies to tie executive compensation more closely to corporate performance and to take other steps to assure that outsize bonuses are not paid before meeting financial goals.
The new rules will cover all financial institutions, including those not now covered by any pay rules because they are not receiving U.S. government bailout money. Officials say the rules could also be applied more broadly to publicly traded companies, which already report about some executive pay practices to the Securities and Exchange Commission. Last month, as part of the stimulus package, Congress barred top executives at large banks getting rescue money from receiving bonuses exceeding one-third of their annual pay.
Up until now, executive pay regulations have been justified by the Obama Administration as applying only to companies that have received bailout money. Now, they will cover “all financial institutions,” including those not receiving bailout money. And, the thought is to put them into effect via regulation, rather than legislation; God forbid that Congress should actually have a chance to debate this stuff, after all.
If this doesn’t constitute massive and excessive government interference in the economy, I don’t know what does. Since when are unaccountable bureaucrats qualified to tell people how much they should be paid? And since when can they do it for people who work in companies that have received no government aid and do not have government holding any shares whatsoever?
There is, to say the least, something completely un-American about all of this. The flight of talent that has already begun from American companies to institutions whose workers will not be subjected to the onerous taxes and regulations proposed by the Obama Administration will only increase. And that will ultimately make American companies less competitive. Anyone who thought that the Administration’s massively statist response to the current financial crisis will help solve our problems has got to be smoking something. And I, for one, don’t want to know what that something is.