Compensation Czar

Last week, Treasury secretary Timothy Geithner met with the new "Compensation Czar" Kenneth Feinberg, SEC Chairperson Mary Schapiro, and others to discuss the issue of executive compensation. The public, the media, and, increasingly, the government continue to voice their concerns on pay practices, not only at the large financial institutions that have received monies from the Troubled Asset Relief Program (TARP), but also executive compensation in general.

Since February of this year, executive pay at TARP companies has been limited to $500,000 for certain executives, and bonuses for this select group have been capped at one-third (1/3) of that annual pay. Other compensation must come in the form of restricted stock that can only be paid out either after the government has been repaid or after a specified period of time has elapsed to guarantee that any gains realized are genuine.

However, following this meeting last week, Secretary Geithner confirmed to the public that, for non-TARP companies, "We are not capping pay. We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive." Rather, the Treasury secretary is looking to beef up Board of Director independence standards and encourage more companies to adopt "say on pay" proposals for shareholders.

Kenneth Feinberg also has said that he does not see a "one size fits all" approach to executive compensation for the companies with whom he has been charged to work. Rather, he too feels that it is not the pay itself, but the pay practices that should be addressed at these companies. This is surprisingly refreshing news coming from our government agencies.