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Executive pay: How much say should Obama 'czar' have?

High executive pay and bonuses are unseemly after taxpayer bailouts, many Democrats charge. But GOP lawmakers worry about federal 'pay czar' meddling in the workings of capitalism.

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To Republicans concerned about government meddling in the workings of capitalism, Feinberg stressed that his oversight extends only to seven firms – and to those seven only because the government is now in an ownership position.

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“The word ‘czar’ does fit you, and you seem to fit comfortably in the word czar,” said Rep. Mark Souder (R) of Indiana. “It’s still a little scary ... to see one person with this much power over major institutions.”

Democrats, in contrast, worried about the opposite risk – that Washington will have too little transformative influence over incentive practices that ran amok in the financial sector.

“I’m hopeful that the model that we have developed for the seven companies ... might be adopted voluntarily” by others on Wall Street, Feinberg said.

Pay for performance

The Feinberg approach, which he said was developed through consultation with federal officials as well as academic experts, seeks to strengthen the emphasis on performance-based pay. In setting pay last week for the top 25 executives at the firms he oversees, Feinberg sharply cut guaranteed pay – including salary and perks but also bonuses that don’t depend on performance.

He allowed executives to then add to their base pay through stock incentives based on performance over two-, three-, and four-year periods. On top of that, additional performance-based pay hinges on whether the firms repay their TARP funds.

He said executives at the firms have also generally cooperated in renegotiating pay that had been contractually agreed upon before the TARP rescue.

Some compensation experts are skeptical, however, that Feinberg’s approach will succeed in aligning corporate incentives with the interests of taxpayers and the economy.

The debate over the pay czar’s work comes as the economy is struggling to regain its footing after a year of crisis rooted in banking troubles. Many financial firms are set to pay record amounts to employees, however, while the national economy is experiencing nearly 10 percent unemployment.

“We’re on two different planets,” said Rep. Elijah Cummings (D) of Maryland. Wall Street “might be a culture that’s impossible to turn around.”

The Federal Reserve has also entered the fray, however, unveiling plans last week to monitor pay practices at banks as part of its effort to ensure the soundness of the financial system. Beyond that, lawmakers are considering legislation that might give private shareholders more influence on corporate pay.

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