The president also will seek legislation that requires corporate compensation committees to be independent from corporate management. The move would give the Securities and Exchange Commission authority to strengthen the independence of the corporate panels that set executive pay.
The official spoke on the condition of anonymity because the proposal has not been made public. Treasury Secretary Timothy Geithner was expected to spell out details of the plan later Wednesday. The proposals are part of an effort by the administration to rein in a compensation system that Obama and his economic team say has encouraged excessive risk taking and contributed to the financial crisis.
While the shareholder votes would not be binding, they would shed more light on skyrocketing executive pay and exert pressure on boards of directors. The administration believes the so-called "say-on-pay" plan will make directors more accountable to shareholders.
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.
The administration official also said the administration will appoint a "special master" to oversee compensation at firms receiving large amounts of government assistance. The pay overseer would have the power to reject excessively generous pay plans.
The official said the special master will review the compensation for the top 100 salaried employees at firms that receive exceptional assistance under the Troubled Asset Relief Program. Among the companies that could be affected would be Bank of America, General Motors and the American International Group.
The special master is expected to be Kenneth Feinberg, a lawyer who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks.
On Tuesday, 10 of the nation's largest banks got permission to pay back their share of the taxpayer money, just in time to avoid the new pay regulations. But executives at several other high-profile firms, including Citigroup, Bank of America, the American International Group, Chrysler and General Motors, would fall under the new bonus limits.
Executive pay is a politically charged issue. Bonuses totaling $165 million issued by AIG in March set off a public and congressional outcry.
Obama and his economic team have been trying to temper the populist urge to cap salaries while at the same time trying to make the case that compensation practices contributed to the current crisis by encouraging high risk taking.
"I think boards of directors did not do a good job," Geithner said Tuesday. "I think shareholders did not do a good job in terms of discipline and compensation practices."
The financial sector has been pushing back, arguing that restrictions that are too stringent could dampen innovation and drive professional talent to foreign firms that don't face compensation limits.
"This is the opening of Pandora's box," said Tom Quaadman, an expert on financial institutions at the U.S. Chamber of Commerce.
Sen. Frank Lautenberg, D-N.J., encouraged Geithner to act. "We've got to change corporate culture that says the leadership at the top can often take its compensation without regard for what happens with the employees or the future investing or the well-being of the company and taxpayers," he said.
The TARP-related regulations stem from legislation Sen. Chris Dodd, D-Conn., inserted as an amendment to the economic stimulus package earlier this year. Among its provisions, it requires the treasury secretary to seek reimbursement of any compensation paid to a TARP recipient's top 25 employees if Treasury deems the payments contrary to the public interest.
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AP Economics Writer Martin Crutsinger contributed to this report.
(Copyright 2009 by The Associated Press. All Rights Reserved.)
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