The End of Comp as We Know It?
June 12, 2009, CFO.com

The Obama administration appointed a pay czar and unveiled government executive compensation guidelines for companies that received TARP funds, in addition to issuing pay reform best practices for companies in general. Ken Raskin discussed each element of the proposal, including executive compensation committee independence from company management and audit committees, say-on-pay proposals and alignment of executive compensation with sound risk management.

Commenting on compensation committee independence, Raskin head of the executive compensation, benefits, and employment practice at White & Case, said: " ... It is simply a best practice for the compensation committee to divorce itself from the company in making these [executive compensation] decisions."

Raskin also discussed whether institutional investors will be likely to delve into the details of compensation proposals. He noted that the law as described by the government would not impose any requirements on corporations other than to permit the non-binding vote — but a "no" advisory vote may have the same effect as a binding disapproval. "The administration is focusing more on public embarrassment than restrictions," Raskin said.

The guidelines also suggest that compensation should be aligned with sound risk management, and should not encourage "excessive" risks. "It will be the toughest thing to do to determine whether something is an excessive risk, or just a risk," Raskin said.