The New Compensation Bill

The House of Representatives passed another bill intended to regulate compensation at companies that receive a capital infusion from the government. This bill is their second attempt at limiting compensation after the first one banning bonuses stalled.

According to the NYT the bill would vest the Secretary of the Treasury with the power to set compensation limits.

The bill adopted by the House on Wednesday would bar companies that received a capital infusion from the federal government from paying any bonus or other compensation that is “unreasonable or excessive” as defined by the Treasury, until they had repaid their bailout money to the government.

The companies would also be barred from paying any bonus that was not “directly based on performance-based measures.”

The bill requires the Secretary of the Treasury to define what constitutes unreasonable or excessive pay.

It’s unclear from the Times article how deeply the Secretary has to dig into the compensation schemes of any bailout recipient. Presumably the bill gives him the power to set compensation levels for all employees of a given firm. Actually it sounds as if he might be required to do so.

Somehow this doesn’t feel like what the Founding Fathers had in mind when they set things up.

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