Here's Secretary of the Treasury Tim Geithner a few minutes ago, laying out some of the many ways the government will not be setting financial-firm compensation packages:
A few things about what we are not doing:
We are not proposing an ongoing government role in setting policy on compensation.
We do not believe it's appropriate for the government to set caps on compensation.
We are not going to prescribe detailed prescriptive rules for compensation.
We think all those things would be ineffective, could be counterproductive in some ways. And we're going to try to find the right balance looking forward. We're going to find a device to assess progress over time so we can encourage better progress and reform.
Here are all six of the five "broad-based principles" Geithner has in mind:
- [P]erformance based-pay should be conditioned on a wide range of internal and external metrics, not just stock price.
- Companies should seek to pay top executives in ways that are tightly aligned with the long-term value and soundness of the firm. Asking executives to hold stock for a longer period of time may be the most effective means of doing this…
- Compensation committees should conduct and publish risk assessments of pay packages to ensure that they do not encourage imprudent risk-taking.
- We should reexamine how well these golden parachutes and supplemental retirement packages are aligned with shareholders' interests, whether they truly incentivize performance, and whether they reward top executives even if their shareholders lose value.
- We intend to work with Congress to pass legislation in two specific areas. First of all, we will support efforts in Congress to pass "say on pay" legislation, giving the SEC authority to require companies to give shareholders a non-binding vote on executive compensation packages.
- [W]e will propose legislation giving the SEC the power to ensure that compensation committees are more independent, adhering to standards similar to those in place for audit committees as part of the Sarbanes-Oxley Act.
Meanwhile Special Master of Compensation Kenneth Feinberg has been appointed. Like the Czars before him, Feinberg will not be requiring anything except that the decisions of private companies comport with the good-faith judgment and deep financial understanding of the mob with pitchforks from whom President Obama is protecting America's CEOs.
Fun fact: Franklin Roosevelt wanted a $25,000-a-year national income cap. All in the name of shared sacrifice, don'tcha know. Given that Obama's tax-fairness breakpoint seems to come in at $250,000, that seems like a fair place to put the compensation cap. It'll prove once again that Obama is exactly ten times better than FDR.