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Administration Proposes New Steps to Regulate Executive Pay

The Obama administration outlined a plan for new executive compensation regulations Wednesday, putting the politically charged issue of executive pay back in the spotlight. Analysts examine how more oversight will affect the industry.

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  • JUDY WOODRUFF:

    The politically charged issue of executive pay has been front and center since the bailouts began last fall.

  • U.S. PRESIDENT BARACK OBAMA:

    That is the height of irresponsibility. It is shameful.

  • JUDY WOODRUFF:

    That's the president responding to news soon after he took office that some Wall Street firms that helped lead the economy into freefall paid out more than $18 billion in bonuses last year.

    Whether and how to react to the pay issue has been the subject of internal administration discussion and previous attempts to tame compensation.

    Today, Secretary of the Treasury Tim Geithner announced two initiatives aimed at executive pay. One proposal, dubbed "say-on-pay," would authorize the Securities and Exchange Commission to require companies to hold nonbinding shareholder votes on executive pay packages.

    A second plan would give the SEC authority to ensure the independence of compensation committees that set pay for executives at some firms.

    TIMOTHY GEITHNER, Treasury secretary: We'd like compensation practice to better reinforce, be better aligned by sensible risk-management practice. And we'd like to see better transparency and accountability, frankly, about compensation practices.

  • JUDY WOODRUFF:

    But Geithner had as much to say about what the government was not proposing to do. In contrast to its own earlier proposals, the administration seemed to back away from setting limits on pay at $500,000 for some executives.

  • TIMOTHY GEITHNER:

    We are not proposing ongoing government role in setting policy on compensation. We do not believe it's appropriate for the government to set caps on compensation.

  • JUDY WOODRUFF:

    Congress passed limits on executive compensation as part of the stimulus bill in February over the objections of the Obama White House, but those limits affect only companies taking federal bailout money after February.

    Weeks later, the administration found itself embroiled in controversy: The bailed out insurer AIG paid $165 million in bonuses, sparking widespread public and political fury.

  • BARACK OBAMA:

    How do they justify this outrage to the taxpayers who are keeping the company afloat?

  • JUDY WOODRUFF:

    Today, in conjunction with the other proposals, the administration appointed a special master to oversee the compensation packages for highly paid employees at more than 80 firms that have received federal money.

    The special master is Kenneth Feinberg, a Washington attorney known for setting the compensation for 9/11 victims' families. He will be empowered to set the pay for executives at seven firms, including AIG, Bank of America, Citigroup, and the automakers.

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