Wednesday, September 30, 2009

Navel Gazing and UPDATE: Executive Compensation and Financial Markets

So I’ll admit my own distraction for the last week, but was surprised that when I tuned-in again, the issues of executive compensation and market regulation had been subject to significant movement. Seriously: this is why people are afraid to take vacations.

The Consumer Financial Protection Agency (“CFPA”) being proposed by the Obama Administration (discussed earlier here) has taken some serious heat >> members of the President’s own party are offering competing proposals that in fact contain no mention of CFPA at all. Well, sort of … in place of creating a new federal regulatory structure for financial products marketed to consumers, Representative Walt Minnick (D – Idaho) has proposed having existing state and federal regulators work with one another under a Consumer Financial Protection Council (“CFPC”). Rumor also has it that once supportive House Financial Services Committee Chairman Barney Frank (D – Mass.) has indicated that the final bill will not contain the “plain vanilla mandate;” recall, under the CFPA, the government would create standard financial products that would be required to be offered in tandem with specialty products banks and firms offered to consumers. The House Committee meets today at 10am to continue hearings on the matter; a webcast is available from the House site here.

The SEC is creating a new division of Risk, Strategy and Financial Innovation. The new division will advise the commission on how new developments, products, and trends may affect the financial market and systemic risk. The division actually pulls together functions across existing Commission divisions, including the Office of Economic Analysis and the Office of Risk Assessment.

Microsoft’s Board of Directors approved a shareholder say-on-pay proposal, giving its shareholders an advisory vote on executive compensation. The first vote will happen at this year’s shareholder meeting on November 19th, and then occur again every three years after.

The Federal Reserve itself is moving to amend compensation practices, and is seeking to expand its regulatory reach regarding the compensation of nearly all bank employees. Caps are not being sought, but evidently the Fed is toying with different methods of how to curtail the amount of risk-taking employees throughout the bank take on behalf of consumers.

Glad the Fed thinks it can fix something, because every time you hear a bell ring, another American bank fails.

And our favourite main-man – Kenneth Feinberg the Pay Czar – has announced that within the next several weeks he will be disclosing some of the compensation revealed to him and approved by him. Rumour is Feinberg is looking to set some manner of precedent.

And precedent seems to be all we will be getting out of the recent G-20 meeting on the issue of executive compensation. Each of the world leaders in attendance affirmed their intent to reform executive compensation and capital requirements at banks, and then they each exchanged promise rings and caught the next flight home.

FWIW – a few of the headlines I found in my inbox over the course of last week. My continued obsession with Bank of America (“BofA”) of course continues, and has also been hot lately. BofA warrants its own post, though, so see you at lunch!

Photo credit: Anne Geddes, as portrayed by Pauline Kaill on Playle's Online Auction.

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