USA: Treasury statement on executive pay

Yesterday the US Treasury Secretary Tim Geithner issued a statement outlining several principles for the reform of executive pay and highlighting a couple of legislative proposals. Mr Geithner stated:

We intend to work with Congress to pass legislation in two specific areas. First of all, we will support efforts in Congress to pass "say on pay" legislation, giving the SEC authority to require companies to give shareholders a non-binding vote on executive compensation packages. "Say on pay" – which has already become the norm for several of our major trading partners, and which President Obama supported while in the Senate – would encourage boards to ensure that compensation packages are closely aligned with the interest of shareholders.

Secondly, we will propose legislation giving the SEC the power to ensure that compensation committees are more independent, adhering to standards similar to those in place for audit committees as part of the Sarbanes-Oxley Act. At the same time, compensation committees would be given the responsibility and the resources to hire their own independent compensation consultants and outside counsel".

In addition to the statement, further information is available in a say on pay factsheet and a compensation committee independence factsheet.