Geithner says no to salary caps for execs, yes to bonus rules

Treasury Secretary Tim Geithner signaled Obama administration opposition Monday to any attempts to cap the salaries of executives whose companies are on government support, but said it would push for new regulations on bonuses and incentives.

Geithner indicated receptiveness to plans floated by some lawmakers and regulators to revamp regulations on incentives and bonuses that critics alleged contributed to risk-taking in the financial services industry.

“No I don’t think so,” Geithner said at a forum sponsored by Newsweek magazine when asked whether the executives of companies receiving TARP funds should make no more in salary than the secretary — which Geithner acknowledged was under $200,000 per year.

“I don’t think our government should set caps on compensation,” Geithner said. “I think we need to put in place some broad constraints on incentives compensation.”

Geithner’s remarks fall against a backdrop of comments by TARP Oversight Panel Chairwoman Elizabeth Warren’s assertion that it is “entirely appropriate” to ask questions about compensation.

House Financial Services Committee Chairman Barney Frank (D-Mass.) has rejected caps on salary, but said there should be new regulations on bonuses and other incentives — not just in the financial sector, but broadly across the economy.

Geithner suggested several options available to constrain bonuses, including increased shareholder input on executive pay, bonuses tied to longer-term returns, more disclosure requirements with the Securities and Exchange Commission (SEC) and other options.

“We shouldn’t be setting broad caps, we should be trying to get the incentives better,” Geithner told the audience at the National Press Club.