WASHINGTON – Some analysts are expressing concern that the Obama Administration’s proposed standards for compensation at financial services firms that would control and even limit risk will, in fact, not discourage the type of short-term risk-taking that contributed to the financial crisis.
American Banker, an affiliate of Credit Union Journal, reported that the Treasury Department said it is not looking to limit the total pay executives receive. Kenneth R. Feinberg, President Obama's special master for compensation, wants to change pay incentives, giving executives a greater stake in the long-term performance of their firms. That would mean, for example, smaller up-front cash salaries and fewer perks, more compensation in the form of company stock and a longer wait to receive it.
"I see no indication whatsoever that the business community is paying any attention to the administration's suggestions," Nell Minow, co-founder of the Corporate Library, an independent corporate governance research firm, told American Banker. "On the contrary, I think pay is worse this year than it's ever been."
American Express, for example, shifted much of chief executive Kenneth I. Chenault's compensation to cash. Even though his overall pay for 2009 dropped from the year before, Chenault received $11 million, or two-thirds of it, in cash. By contrast, more than two-thirds of his compensation in 2008 was in stock and stock options. His cash payout was $7 million.
At Wells Fargo, the company more than tripled the cash salary this year of chief executive John Stumpf, and Corning, a glass and ceramics maker, restructured its long-term incentive pay program – previously centered on stocks and stock options – to focus more heavily on cash, American Banker reported.
Some firms are rewarding executives with more perks. In the most recent fiscal year, more U.S. chief executives received club memberships than in the previous year, and companies paid more to cover their use of corporate jets for personal travel, according to studies released last week by the Corporate Library.
