Government proceeds with plans to regulate executive pay

The move to regulate executive pay is about to take a giant step forward. The Administration may go so far as to force companies that have received federal financial assistance to submit any significant change in management compensation to a new federal regulator.

According toThe New York Times, "The proposal is part of a broad set of regulations on executive compensation expected to be announced by the administration as early as this week."

Why then is the federal government also forcing changes on the boards of big banks and the two auto companies that have received tax-payer cash? Bank of America (BAC) has just added four directors with significant bank and bank regulatory backgrounds. Are the new board members incapable of making reasonable decisions on compensation, when they know that big pay packages are viewed negatively by the government and the public?

The emerging federal programs to force radical changes on industries to which the government has given assistance may be a good idea in theory. But these changes often collide with responsibilities that rest with boards of directors. The fact that the government effectively "owns" these boards because of the pressure it has put on companies to create them should be control enough.

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

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