Government enthrones pay czar and wants more executive pay control

Kenneth Feinberg, the lawyer who oversaw the government's compensation fund for victims of the September 11, 2001, attacks, was appointed by the Obama administration as the pay czar to control compensation of top executives at companies who receive big governmental investments.

With the new regulation Feinberg would be entitled to oversee the pay for top executives of the seven firms deemed to be receiving exceptional assistance -- General Motors, Citigroup, Bank of America, Chrysler, AIG, GMAC and Chrysler Financial. At these companies, each of which has received over $500 million in aid, Feinberg would be able to reject pay packages for the five most senior executives at each firm. He would also have the power to reject the next 20 most highly paid employees if he finds the compensation excessive.

Decisions of the pay czar will be based on a set of principles that weigh the risks being taken by executives, the potential return for taxpayers, how pay is allocated between salary and other forms of compensation, comparable pay at other firms and whether pay is calculated to improve performance.

Apart from this appointment US Treasury Secretary Timothy Geithner called upon the Congress to pass the legislation giving the Securities and Exchange Commission more powers to influence how executive pay scales are set. Geithner wants Congress to give the SEC authority to oblige all publicly traded companies to give shareholders a non-binding vote on pay packages for top executives. Besides, the Treasury also wants legal power for the SEC to ensure that internal pay committees, which set pay levels and perks for company leaders, are more independent from management.