Geithner to Wall Street: We don't want to cap your pay

WASHINGTON -- Treasury Secretary Timothy Geithner says the Obama administration doesn't want to place caps on executives' pay — even though it believes excessive compensation led to risk-taking that contributed to the financial crisis.

Geithner said the administration will seek legislation that will permit shareholders to vote on executive pay packages, but the results would not be binding on boards of directors. The administration will still restrict compensation at companies that are receiving taxpayer assistance through its $700 billion financial bailout program.

Geithner said the shareholder measures, as well as legislation to keep corporate compensation committees independent from boards of directors, will reinforce pay guidelines that the administration released Wednesday. Those principles encourage corporate boards to adopt pay packages that reward long-term performance rather than short-term gains.

In anticipation of the new guidelines, Geithner scheduled a private meeting Wednesday with SEC Chairwoman Mary Schapiro, Federal Reserve Governor Dan Tarullo and executive pay experts to discuss compensation policies.

Officials from the Treasury Department, Federal Reserve and Securities and Exchange Commission were expected to testify about executive compensation on Thursday before the House Financial Services Committee.

Chairman Rep. Barney Frank said the goal is to ensure salaries and bonuses don't encourage industry executives to take big risks.

"We have a heads I win, tails I break even compensation system in the financial services industry in America," said Frank, D-Mass. "Executives have a perverse incentive to expose their companies to more and more risk, but only the shareholders realize the downside of bad bets."

Those overarching guidelines for the industry come as the administration prepares to issue new, more specific regulations governing pay at financial institutions that have received infusions from the Troubled Asset Relief Program. The regulations, prompted by legislation passed by Congress earlier this year, would limit top executives to bonuses no greater than one-third of their annual salaries.