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Obama U-turns On Executive Banker Pay Capping

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The Obama administration has stepped back from radical threats to cap multimillion-dollar Wall Street pay packages, opting instead for modest measures to beef up corporate governance, including British-style "say on pay" votes for shareholders.

Fearful that European and Asian banks will lure away talented US staff, the White House has tempered its aggressive stance of February, when Obama said he wanted a maximum salary of $500,000 (£306,000) for executives at federally aided firms.

Adopting a much more measured tone, treasury secretary Timothy Geithner outlined "broad-based principles" to improve accountability on pay. Geithner said the US government would support efforts in Congress to introduce non-binding votes by shareholders on executive remuneration. Furthermore, he pledged to tighten rules on the independence of directors serving on pay-setting committees.

"The financial crisis had many significant causes, but executive compensation practices were a significant factor," said Geithner. "Incentives for short-term gains overwhelmed the checks and balances meant to mitigate against the risk of excess leverage."

Geithner pledged to promote "transparency and accountability" in setting pay. But he made it clear that he viewed the government's role as limited.

"We are not capping pay," he said. "We are not setting forth precise ­prescriptions for how companies should set compensation."

Since the credit crunch began, public opinion in the US has turned squarely against vast rewards once seen as part of the American dream. The bosses of struggling Wall Street firms such as Citigroup, Bank of America and Lehman Brothers have been held up to unprecedented scrutiny. Disquiet turned into fury when it emerged that the insurer AIG was distributing $165m in bonuses to employees at a financial products division widely blamed for catastrophic losses.

Obama has long been a supporter of "say on pay" votes, already universal in Britain, which give investors a chance to voice their opinion on top-level remuneration.

Congress could still push for tougher action than that outlined by Geithner. The chairman of the House financial services committee, Barney Frank, wants all bonus schemes to come with measures penalising executives if they make a risky decision that costs their company money.

"We have a situation at too many companies where it's 'heads they win, tails they break even', so they keep flipping the coin," said Frank, who is sceptical about the need for huge performance-related pay mechanisms. "These are the most highly productive people in prestigious posts," he added. "The notion that we need to give them something extra to do the right thing troubles me."

Pay experts said many companies simply wanted clarity on what shape any new rules would take. Steven Hall, a remuneration consultant based in New York, said 19 different bills on pay had gone before Congress since the beginning of the year.

"Everybody's just throwing everything up against a wall to see what sticks," said Hall, who believes compensation will inevitably change on Wall Street anyway as banks make lower profits, accept greater regulation and take less dramatic risks.

"There will be a long-term impact on pay in the US but that's more driven by the fact that these will be different businesses from what they used to be," he said.

http://www.guardian.co.uk/business/2009/ju...-salary-capping

The troughing continues.........

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Guest BoomBoomCrash

Why is it that in the banking industry it is considered necessary to pay millions of pounds for people of modest talent?

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At first I thought all that Alex Jones and his ilk were nutters on the outside, but after watching Obama fail on all his pledges and turn even more of a lackey to big business, and seeing their predictions come true time after time, I start to question the world I live in and just what is going to happen to us all.

Scary times.

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"Everybody's just throwing everything up against a wall to see what sticks," said Hall, who believes compensation will inevitably change on Wall Street anyway as banks make lower profits, accept greater regulation and take less dramatic risks.

Why would anyone invest in a fraud ring like this anyway now? Invest in banking - because the taxpayer is on the hook, but the executives will just find a way to cream off the money and leave the shareholders (and taxpayers) with the losses, meanwhile the good companies have to fend for themselves or be beholden to these scum for financing.

Great way to obliterate investment and tilt the table so much that it topples over.

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At first I thought all that Alex Jones and his ilk were nutters on the outside, but after watching Obama fail on all his pledges and turn even more of a lackey to big business, and seeing their predictions come true time after time, I start to question the world I live in and just what is going to happen to us all.

Scary times.

I know what you mean. :ph34r:

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I am donning a flame retardant jacket before posting this, but I don't think he has a choice. If he caps the salaries paid to those working for government aided banks then not only does he end up with the weakest of the banks, but the weakest staff to run them. It was a stupid pledge to make to start with - an attempt to win votes.

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What a shame, he fell for the 'we've got talent, pay us or we will screw up some other banking system' ruse. Should have had Simon Cowell in .

They are going to pay him tens of millions once he leaves office.

(Or whatever a large amount of resources is by then.)

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I am donning a flame retardant jacket before posting this, but I don't think he has a choice. If he caps the salaries paid to those working for government aided banks then not only does he end up with the weakest of the banks, but the weakest staff to run them. It was a stupid pledge to make to start with - an attempt to win votes.

What do you mean by "the weakest staff to run them"?

You mean all those stupid fu*kers that put us into this mess in the first place are actually financial geniuses after all?

Have I missed something here?

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They are going to pay him tens of millions once he leaves office.

(Or whatever a large amount of resources is by then.)

Yes and more for all the after dinner speeches and the kissing og dribbling babies and the opening of whatever building of the day and just for for smiling those nice white teeth if his, oh yes.

I would puke, but it's late.

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