With the smell of fat bonus checks again wafting down Wall Street, the Obama administration and Democrats in Congress on Thursday moved closer to a clampdown on U.S. corporate executive pay.
The Treasury Department sent Congress a proposed bill that would give corporate shareholders an annual non-binding vote on executive compensation and require more independence for boardroom compensation committees.
The say-on-pay legislation would resemble rules adopted in Britain in 2002. It also would require separate shareholder votes for golden parachutes or other special payments to executives in mergers or acquisitions, the Treasury said.
Representative Barney Frank, chairman of the House of Representatives Financial Services Committee, said his panel will likely vote next week on an executive pay bill.
The recent news of compensation on Wall Street shows that some financial leaders yearn for the stirring return of yesteryear and demonstrates the need to adopt legislation on executive pay, Frank, a Democrat, said in a statement.
Financial titan Goldman Sachs reported a surge in quarterly profits on Tuesday and set aside $6.65 billion for salary, bonuses and benefits, putting the average Goldman employee on pace to earn more than $900,000 this year.
Chief Executive Lloyd Blankfein, senior officers and star traders will likely receive tens of millions of dollars.
Goldman's close government ties have come under scrutiny as it seemingly sailed through the recession, accepting $10 billion in taxpayer bailout money and other government aid, including access to the Federal Reserve's borrowing window.
Goldman rival JPMorgan Chase & Co on Thursday also reported sharply higher quarterly profits. Both firms have repaid their government bailout aid, freeing them from compensation strictures imposed on bailout recipients.
Recently reported bonus pools do suggest that there may be a return to the old ways which caused such damage to our economy. It reinforces our determination to adopt a reasonable set of legislative goals, Frank said.
Treasury's bill is part of a broad Obama administration plan to reshape financial regulation in response to the worst U.S. financial crisis in generations.
The administration has vowed to revamp executive compensation across the board to discourage excessive risk taking and better align pay with shareholder interests.
Even though shareholder votes on compensation would be non-binding under the bill, Treasury said they would influence companies and persuade them to more directly link pay with performance. Such compensation changes were widely implemented in Britain after say-on-pay rules were adopted, it added.
(Additional reporting by David Lawder; Editing by Leslie Adler)