As the Obama administration moves to regulate the pay of some executives, congressional Democrats want the government to go even further in controlling salaries and bonuses.
Republicans, meanwhile, are calling for an end to government bailouts.
House Financial Services Committee Chairman Barney Frank, D-Mass., said at a hearing that a proposal by the Obama administration to strengthen corporate compensation committees and make them more independent did not go far enough. Instead, Frank wants legislation that would prevent compensation boards from approving pay that led employees to take excessive risks.
“I do differ with the administration in that hope springs eternal and their position seems to be that if we strengthen the compensation committees, we will do better,” Frank said.
The White House has already moved to control the pay of executives of companies receiving bailouts, but President Barack Obama is proposing executive pay legislation to reach beyond the bailouts.
Frank is at work on a bill that would overhaul the regulation of the nation’s financial system, including more controls on executive pay, and he told The Examiner he planned to have a bill written and approved by his committee before August.
Frank heard testimony Thursday from Gene Sperling, a top aide to Treasury Secretary Tim Geithner, who told the panel that compensation plans at publicly traded companies should properly measure and reward performance, “in order to best align the incentives of executives with those of shareholders.” Sperling also insisted that Geithner did not want to cap pay, but said compensation reform should be incorporated “at all firms, and not just for the financial services industry.”
Sperling’s testimony came a day after the administration announced it would limit executive pay at companies that took a share of the $700 billion in government bailout money issued last fall. It also named a “pay czar” to oversee the highest salaries at those firms.
Rep. Spencer Bachus of Alabama, the top Republican on the financial services panel, said pay controls on non-bailout firms would subject compensation decisions to “a one size fits all” strategy, or even worse, politically based “blackmail and coercion.”
House Republicans on Thursday unveiled a reform plan that stands in stark contrast to what the Democrats have in mind.
“The guiding principle of the Republican alternative can be summed up in one sentence — no more bailouts,” the six-page outline of the GOP plan reads.
Republicans also propose phasing out government subsidies to Fannie Mae and Freddie Mac over the next few years and putting them into receivership if they are not viable.
Frank told The Examiner he agreed with Republicans that Fannie and Freddie needed restructuring, but taking any action that might put them out of business “would terribly exacerbate the housing crisis because they are very important housing resources.”
