SEC regulations for public companies say that compensation committees for the boards at public companies recommend pay for senior managers and those recommendations are then given to the entire board of directors for approval. The information is reported in every proxy along with the methods used to arrive at compensation of top officers.
Pay czar Kenneth Feinberg plans to take the power of setting management compensation away from the boards of directors at the financial firms that owe the government money which destroys a great deal of the reason that public company boards exist at all.
According to The Wall Street Journal, Feinberg will set compensation for the top people at the Wall St. firms that have not paid back the capital that they received during the credit crisis so that cash salaries are cut. In the place of cash payments, Feinberg will give managers stock which they will have to hold for a long period, perhaps years.
One unintended consequence of the plan which has been mentioned often in the past is that the very best people at the firms with restricted pay will go to hedge funds and other private money management firms that have no compensation restrictions.
The greater issue is the role of boards which are elected by shareholders of these public companies. The government does own 34% of Citigroup (NYSE:C), but Feinberg’s plan would strip its shareholders and the board that the shareholders elect of the critical power that they have to control and direct management performance through compensation incentives.
The irony of Feinberg’s plan is that the boards of the most troubled financial firms were “appointed” by the government. Almost the entire board of Bank of America (NYSE:BAC) has been replaced by candidates that the Treasury approved. These directors, put into place to make sure that taxpayer interests are served, are now being stripped of a great deal of the power that they have to do that job.
The Wall St. companies that still owe the government money have new boards approved by the government and their decisions will be undermined by a pay czar appointed by the government. It is hard to say whose interests are served by that system.
Douglas A. McIntyre
100 Million Americans Are Missing This Crucial Retirement Tool
The thought of burdening your family with a financial disaster is most Americans’ nightmare. However, recent studies show that over 100 million Americans still don’t have proper life insurance in the event they pass away.
Life insurance can bring peace of mind – ensuring your loved ones are safeguarded against unforeseen expenses and debts. With premiums often lower than expected and a variety of plans tailored to different life stages and health conditions, securing a policy is more accessible than ever.
A quick, no-obligation quote can provide valuable insight into what’s available and what might best suit your family’s needs. Life insurance is a simple step you can take today to help secure peace of mind for your loved ones tomorrow.
Click here to learn how to get a quote in just a few minutes.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
