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Barney Frank to Regulate YOUR Pay!

May 14, 2009 3:33 pm

The U.S. Government is considering taking an active role in setting both financial and non financial companies executive pay. Congressman Barney Frank, Chairman for the Financial Services Committee stated, “the federal government should play a role in setting executive-pay rules for public companies to reduce incentives that lead to excessive risk-taking,” according to Bloomberg. He has said that it is to focus on financial companies but could be a plan that can be implemented for all companies. That is getting way out of hand…right?

Chairman Frank does not believe that the government should take an active role in setting the dollar amount that executives are to be paid, just the rules on how they can get paid. This most recent proposal is in response to the excessive risk that executives of financial companies have been taking to boost their company stock prices. A heavy portion of executive pay is based on the performance of the underlying company’s stock price through grants of restricted stock, incentive and non-qualified stock options and deferred compensation. Inflating their company’s stock price could, and has, resulted in an extraordinary amount of compensation.

Discussions of how to curb executive compensation have been gaining speed with the Obama administration and federal regulators. In the beginning, the initial goal was to limit the bonuses of those companies who received money from the Troubled Asset Relief Program (TARP). It appears now however that President Obama and his team want to take things further to limit the compensation for all financial companies whether or not they received money from the TARP. Congressman Barney Frank has also stated that “the rules should extend to non-financial companies as well,” according to Bloomberg.

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Written by Andrew Horowitz · Category(s) Economy, Markets    |  Tags:   

5 Responses to “Barney Frank to Regulate YOUR Pay!”

  1. Chris on May 14th, 2009 8:12 pm

    I know they are probably doing it wrong, and they will have some stupid bill passed with tons of loopholes that really will not change anything….BUT I think this should be discussed. Not with the government telling who can make however much money, but at least shareholders having a say. I am not sure what the solution is, but pay is NOT tied to performance, and boards of directors are buddy/buddy with the executives being compensated, while no one is in line with the success of the company (long term). Surely you see a problem here? Companies should make owners rich, not management.

  2. Barney Frank to Regulate YOUR Pay! « L’s Word on May 14th, 2009 5:59 pm

    [...] May 14, 2009 [...]

  3. JDogg on May 15th, 2009 2:10 am

    I guess more companies will be going private? That will be good for the stock market.

  4. jt dafdasd on May 15th, 2009 7:24 am

    the foxes making the laws for the hens…

  5. bram99 on May 15th, 2009 2:37 pm

    Great, they did so well regulating Fannie, Freddie, the CDO mess, etc.., that buoyed by these huge succeses they are confident in their abilities to regulate other things.

    Reminds me of the story about the members of the Soviet Politburo that came to see capitalism in the early 1980's. After taking a stroll through a Walgreens or some other drug store, they were amazed at our regulation and planning abilities and asked one of our government officials what planning system the government used to make sure all of those different products and multiple choices of products got into every store.

    He was obviously missing the point, much the way Frank misses it here. The market should regulate pay. But we can't have private gains and socialized losses – that's what leads to these hugely risky decisions being made by companies, especially those in the financial sector.