Treasury Secretary Timothy Geithner said Wednesday that the Obama administration will take several new steps to reform the ways executives are paid on Wall Street - and he argued that pay packages were partly to blame for the epic Wall Street crash of 2008.

Kenneth R. Feinberg has been appointed to oversee restructuring executive compensation at banks that took TARP money. (Photo: AP)

    "There were clearly some areas of compensation that contributed to excessive risk taking across the financial sector," Geithner said in a meeting with Securities and Exchange Commission Chairwoman Mary Schapiro, Federal Reserve Governor Dan Tarullo and leading executive pay experts.

    Geithner said the administration will support two new pieces of legislation: one called "say on pay," in which shareholders would be allowed to take a nonbinding vote on executive compensation. The other measure would require corporate compensation committee members to be independent from management.

    At the same time, the administration is creating a "pay czar" for banks that have taken Troubled Asset Relief Program bailout funds, naming Kenneth Feinberg, the official who oversaw compensation for survivors of the Sept. 11 attacks, to the position on Wednesday.

    The czar, officially called a "special master," will have the power to reject pay plans that include "excessive or inappropriate" salaries inside companies that have taken "exceptional assistance" from the federal government, and will set the pay for some of the nation's top financial executives. The government's review of salaries will include the top 100 employees.

    But the administration has apparently backed off its earlier plan to put a hard $500,000 pay cap on executive compensation, after concluding that the provision would be too onerous for Wall Street firms attempting to compete with non-TARP banks that could offer unlimited pay packages.

    "We don't see need for further legislation," Geithner said. "We're going to try to find the right balance."

    In a statement released by the Treasury Department, Geithner was even more blunt: "We are not capping pay," Geithner said. "We are not setting forth precise prescriptions for how companies should set compensation, which can often be counterproductive. Instead, we will continue to work to develop standards that reward innovation and prudent risk taking, without creating misaligned incentives."

    Treasury also released new details of its two new legislative proposals.

    On compensation committee independence, the new proposal will mandate that each member of the compensation committee meet independence requirements similar to those for audit committee members under Sarbanes-Oxley, Treasury said. And the compensation committees would be given control of outside compensation consultants, the ability to hire lawyers and their own funding.

    In the say-on-pay proposal, Treasury said, public companies will have to include a shareholder resolution requesting approval or disapproval of executive compensation in annual proxy statements. And shareholders would be allowed to cast nonbinding votes on the annual compensation for the top five named executive officers — a move designed to put pressure on corporate directors to pay attention to shareholder complaints about salaries.

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