Barney Frank Wants to Regulate Your Pay

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.

Comments

[fireball:]

socialism strikes again. fabien never stops. now he is running instead of creeping.
how about we limit congressional pay and do away with the extravagent perks and pensions? actually how about cutting former presidential perks and pensions to.
mr frank should stick to limiting the pay of young male party boys.

May 15 08:59 AM

[NHFDSQD2:]

Franks should be jailed for his treasonous acts aiding in the destruction of the American economy.
He should go away for life.

May 15 09:43 AM

[Seng:]

Yet another reason to avoid being a public company.

May 15 09:45 AM

[Prudent Man...:]

Frank is a poster child for Congressional Term Limits.

Is Massachusetts a part of the U.S. or a Socialistic haven for frustrated academics who can't make it in the Free Enterprise System so they teach and inculcate the same values that made them failures in the competitive world, which they abhor - garbage education in, garbage knowledge and values out.

May 15 10:06 AM

[LCACM:]

The article title is very misleading. The title states that Congressman Barney Frank, Chairman wants to regulate "YOUR" pay. An average employee in the US gets paid around 50K, and Congress has not shown the slightest inclination to regulate this kind of pay. The article refers to the executives whose annual compensation is in the Millions. An executive with a $50M compensation is taking home the pay of 1000 Employees. This is sheer robbery. What can $50m accomplish? A proper mix of 1000 employees comprising of Engineers, Scientists, Project Managers can easily come up with new products that the company can sell, instead of wasting it on executive pay. In the old days bank robbers used to invest in guns, now they invest in a Havard or Wharton MBA.

May 15 10:09 AM

[patriotaxe:]

I agree with Congressman Frank 100% There isn't a pencil/paper-pushing CEO in America today worth more than $200,000 per annum; the same applies to professional athletes. The people who make the products (if they still have jobs) are the foundation of our economy. The real achievers in this nation are teachers, police officers, fire personnel, factory line workers, union members - they are the people who inspire, the people who are the keystone of our way of life. That's where our investment should be placed.

As for "how about cutting former presidential perks and pensions to," I couldn't agree more (with the exception of the spelling). Let's start by removing the Secret service protection for Bush/Cheney. I give them 20 minutes, tops.

May 15 11:08 AM

[ain't no fo...:]

Great comments LCACM and patriotaxe.

The rock star "C" level guys and their captive BoD's have shifted hundreds of billions of $$ of shareholder equity off their books with their egregious self-awarded stock option grants and immediate flips of the newly minted shares.

Then they turn around and pretend they are looking out for shareholder value by announcing share buybacks - most of which never get executed fully, but are just done sufficiently to get the share count back to where it was before they raided the shareholders.

And as egregious as they are, it is just as pathetic that shareholders, the Street sell-side analysts and the media pretend it isn't happening and just clap their hands in gratitude for the swell job the "leaders" are doing.

Read the Form 4's for HOV, TOL from three or four years ago at the housing peak to see what their CEO's and family members took in from option awards - can you say hundreds of millions of $$ - while they were proclaiming that housing would never stop going up) or MRVL, whose CFO cashed in tens of millions of dollars in option awards during that same 2004 -2006 period even as the Feds were starting to investigate MRVL for backdating options, or a company like CELG presently, one or two of whose Directors are getting tens of millions in option flips for showing up at meetings a few times a year.

And check out the prices of these companies shares when their executives were clearing out the from their treasuries - right at the historical tops.

And these are just a few of the hundreds of companies who have outright raped their shareholders with their option practices... while the Street and media and shareholders meekly look the other way.

May 15 11:32 AM

[ain't no fo...:]

For a CFA you just made about as moronic a statement as I've seen on these sites.


On May 15 10:06 AM Prudent Man CFA wrote:

> Frank is a poster child for Congressional Term Limits.
>
> Is Massachusetts a part of the U.S. or a Socialistic haven for frustrated
> academics who can't make it in the Free Enterprise System so they
> teach and inculcate the same values that made them failures in the
> competitive world, which they abhor - garbage education in, garbage
> knowledge and values out.

May 15 11:35 AM

[patriotaxe:]

"mr frank should stick to limiting the pay of young male party boys."

fireball is flirting with a libel charge, as he/she has not provided any proof that Congressman Frank has any interest in "young male party boys." In fact, I recall that the last two representatives with a penchant for lovers of the same gender were both upstanding "family values" Republicans, one from Florida and the other from Idaho.

May 15 12:24 PM

[ain't no fo...:]

And here's the great irony - the voting public was so disgusted by those two wide-stance guys that they turned out to be instrumental in bringing their own repugnican party to its much deserved total defeat in both houses of Congress... too funny!


On May 15 12:24 PM patriotaxe wrote:

> "mr frank should stick to limiting the pay of young male party boys."
>
>
> fireball is flirting with a libel charge, as he/she has not provided
> any proof that Congressman Frank has any interest in "young male
> party boys." In fact, I recall that the last two representatives
> with a penchant for lovers of the same gender were both upstanding
> "family values" Republicans, one from Florida and the other from
> Idaho.

May 15 12:34 PM

[fireball:]

dumocraps? want to label me a reprobate? try constitutionalist.
if mr. barney wants to try a lawsuit fine. did i accuse him of homosexual pedophilia? soliciting underage boys? i see no accusations in anything i said. are you accusing the esteemed mr. frank?
if republicrats or democans play with boys that is not my problem. if a homosexual runs on the platform of constitutional reform he/she gets my vote as long as he/she isn't a pedophile.
you girls are funny. sorry for the typo too.

May 15 01:41 PM

[patriotaxe:]

Spelling errors. Punctuation errors. Capitalization errors. Typos. I don't know how long recess is at your school, fireball, but maybe you should spend your time playing on the swings with the other kids rather than rushing through vacuous retorts on the school computer. You might also try bringing some real content to the discussion.

May 15 02:19 PM

[Xyrus:]

If humans were moral creatures by nature, then reforms like the ones Frank seems to favor would be laughable (and indeed unnecessary).

However, as humans have demonstrated time and time again, we are not moral creatures. When large amounts of money and/or power come into play, it's amazing how far people will twist their moral compass in order to justify their actions.

While perhaps the policies themselves may not be the best thought out, they are trying to address a fundamental problem: How do you stop companies and the people who run them from being...well...a$$holes.

If you get compensated for the number of sales you bring in, you're going to do anything you can to increase sales. Similarly, if you get compensated for the performance of stock price, you're going to do what it takes to get the stock price up.

The problems start when morality gets pushed into a distant second relative to profits. That's when things like sweatshops and poisoning third world shanty towns with toxic waste and destroying the world financial system start showing up.

A free market is amoral. It does not work for the greater good, nor does it work for the greater evil. It works for profits, and anything that doesn't affect the bottom line negatively is fair game. If running your own third world nation of slaves improves that bottom line and keeps the customers and investors lining up, then so much the better.

So how do you keep the markets (and people in general) moral? By removing regulations? Hardly. By adding more? Slippery slope. It has been, and always will be, a careful balancing act.

~X~

May 15 02:39 PM

[fireball:]

oh ya' got me. i'm not much of a typist. i spent my time making money in spite of politicians and corporate criminals. i will leave the academics to you. this is for fun and ideas. i would work on the typing if it mattered to me. just enjoying my early retirement and trading for the contest. success in a rigged system is good enough to replace poor typing skills.
if you don't like what i post no one is forcing you to read it.
i don't really mind the s.s. protection as that seems a reasonable expense. my complaint is for the unreasonable. you can attack politicians from either side and it doesn't bother me.

May 15 03:14 PM

[ain't no fo...:]

Great comments Xyrus.


On May 15 02:39 PM Xyrus wrote:

> If humans were moral creatures by nature, then reforms like the ones
> Frank seems to favor would be laughable (and indeed unnecessary).
>
>
> However, as humans have demonstrated time and time again, we are
> not moral creatures. When large amounts of money and/or power come
> into play, it's amazing how far people will twist their moral compass
> in order to justify their actions.
>
> While perhaps the policies themselves may not be the best thought
> out, they are trying to address a fundamental problem: How do you
> stop companies and the people who run them from being...well...a$$holes.
>
>
> If you get compensated for the number of sales you bring in, you're
> going to do anything you can to increase sales. Similarly, if you
> get compensated for the performance of stock price, you're going
> to do what it takes to get the stock price up.
>
> The problems start when morality gets pushed into a distant second
> relative to profits. That's when things like sweatshops and poisoning
> third world shanty towns with toxic waste and destroying the world
> financial system start showing up.
>
> A free market is amoral. It does not work for the greater good, nor
> does it work for the greater evil. It works for profits, and anything
> that doesn't affect the bottom line negatively is fair game. If running
> your own third world nation of slaves improves that bottom line and
> keeps the customers and investors lining up, then so much the better.
>
>
> So how do you keep the markets (and people in general) moral? By
> removing regulations? Hardly. By adding more? Slippery slope. It
> has been, and always will be, a careful balancing act.
>
> ~X~

May 15 09:52 PM

[Chris of NH:]

Massachusetts is the East Coast version of California and Franks and Pelosi are far to the left of communism.

Frank is the poster child of pure human trash.

On May 15 10:06 AM Prudent Man CFA wrote:

> Frank is a poster child for Congressional Term Limits.
>
> Is Massachusetts a part of the U.S. or a Socialistic haven for frustrated
> academics who can't make it in the Free Enterprise System so they
> teach and inculcate the same values that made them failures in the
> competitive world, which they abhor - garbage education in, garbage
> knowledge and values out.

May 16 09:02 AM

[tbado:]

The government should not be involved in the actual limit. Rather if the wanted to do something they could regulate the process. How ? Easy.
When a company is a publicly traded company hits a certain threshold it becomes regulated by an Executive compensation Act.
This act requires the following - Executive pay for the top 20% & the Board must be submitted to the shareholders & approved by a shareholder vote once per year. The proposed plan is broken up into 5% segments (the Board is a separate group)- that is to prevent boards from loading up a CEO , minimizing the others in hopes that shareholders while regard the overall plan as fair & approve it. Any plan that is not approved is cut 10% and must be resubmitted & approved within 30 days. Until it is approved. The SEC Chairman shall have the authority to permit one extension (up to 14 days) in the event of extraordinary conditions. In the event of a major upheaval - companies are permitted to grant successors at total of 5% increase until the next scheduled annual meeting. This exclusion can only be applied once (meaning that if you go through 2 CEOs the third one can only be receiving 5% more than the first. Companies will retain the right to call a special shareholder meeting for the purpose of approving increased pay packages for cases where they feel they need to offer more than the 5% (subject to the same cutback provisions).
What does this do?
1. Allows companies to compete for talent in an open market format, but allows the companies true owners (stock holders) say over how much employees are paid. This prevents the build up and self serving interests at the top to marginalize stockholders.
2. Lets the stockholders know the true cost of compensation instead of being hidden in all the transactions in its current manner.

May 17 05:38 PM

[patriotaxe:]

"Massachusetts is the East Coast version of California and Franks and Pelosi are far to the left of communism."

"Frank is the poster child of pure human trash."

Thank you for those highly researched and professionally presented facts.

May 18 05:40 PM

[Chris of NH:]

anyone who agrees with Barney Frank is, well, look at my title....


On May 15 11:08 AM patriotaxe wrote:

> I agree with Congressman Frank 100% There isn't a pencil/paper-pushing
> CEO in America today worth more than $200,000 per annum; the same
> applies to professional athletes. The people who make the products
> (if they still have jobs) are the foundation of our economy. The
> real achievers in this nation are teachers, police officers, fire
> personnel, factory line workers, union members - they are the people
> who inspire, the people who are the keystone of our way of life.
> That's where our investment should be placed.
>
> As for "how about cutting former presidential perks and pensions
> to," I couldn't agree more (with the exception of the spelling).
> Let's start by removing the Secret service protection for Bush/Cheney.
> I give them 20 minutes, tops.

May 21 09:45 AM