Another misguided call to regulate Wall Street pay

It seems that every few weeks someone in the federal government calls for a system to regulate the pay of Wall Street CEOs.

The most recent proposals come from Congressman Barney Frank, who likes to be in the middle of these things, and N.Y. State Attorney General Andrew Cuomo, who seems to spend more time "running" for governor than he does working as the lead lawyer for The Empire State.

According toThe Wall Street Journal, "New York State Attorney General Andrew Cuomo is in discussions with Rep. Barney Frank and other lawmakers on a plan to tie Wall Street pay to the long-term performance of the firms."

The idea of the government getting involved in pay packages begs several questions, the first of which is: What is the role of a public company board of directors? The SEC has set up rules and regulations for boards. They have the responsibility for setting management pay, and, in theory at least, answer to shareholders.

If the events of the last year have taught financial company boards anything, it is that the public and financial company shareholders are outraged by Wall Street pay packages. That should make them likely to be more conservative in the future. But if Congress is going to take over certain roles that belong to boards, the entire system of corporate governance may be overturned.

Another question that regulating Wall Street pay brings up is: Where does the regulation end? Banks are getting a lot of government money so Congress may feel that it needs to have some role in determining management paychecks. That approach is spreading to the car companies. Will it also spread to any firm taking government funds to improve their balance sheets? What about corporations that benefit from the stimulus package? The list could be nearly endless.

The government needs to let corporate boards do what they are supposed to do. One of these functions is to set pay packages.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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