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 The State Dictating Salaries - London Press Conference by the President 4/2/09 — Thursday, April 02, 2009 —  PRESIDENT OBAMA: All right, let me sprinkle in another -- it's got to be an international person. All right, this young lady right there. Q Mr. President, Emma Alberici from the Australian Broadcasting Corporation. At the moment, in the U.S., the U.K., and in Australia, executive salaries and bonuses are decided in the boardrooms of major publicly listed companies. Who will be making those decisions on salaries and bonuses as a result of the agreement you've made here today? And if it is still the boards, will they be guided by principles or legislation? PRESIDENT OBAMA: The principles that we outlined I think put in place or move us in the direction of what I consider to be best practices, which is that there is some accountability with respect to executive compensation. Now, theoretically, that should be the shareholders. But the way that too many corporations have operated for too long is that you have a CEO who basically selects his board; the board, in a fairly cozy relationship oftentimes with the executive, hires a executive compensation firm, which, surprisingly, tends to think that it's necessary to retain the best talent to pay people $20 or $30 million a year; and we get into the kinds of habits and practices that I think have not been -- have not served shareholders well, I think ultimately distort the decision-making of many CEOs. When I was in the United States Senate, I actually worked on a piece of legislation that would -- made the simple proposition that executive compensation should be subject to a shareholder vote, even if it was nonbinding, so that there was transparency and accountability and perhaps a shame function that would take place. And that principle, I think, is reflected in these guidelines. What it says is, is that if you get shareholders involved and those shareholders are given a set of principles and best practices by which they can judge executive compensation, then you can still have outsized rewards and success for successful business people, but it will be based on not short-term performance, not three-month performance, not your ability to flip quick profits off products like derivatives that don't turn out to be particularly productive to the company, but based on sustained, effective growth. And that's what's embodied in these documents, and I think that you're going to see a lot of countries try to encourage that kind of transparency and accountability. It doesn't mean the state micromanaging -- ( sneezes) -- excuse me -- I've been fighting this all week -- it doesn't mean that we want the state dictating salaries; we don't. We -- I strongly believe in a free-market system, and as I -- as I think people understand in America, at least, people don't resent the rich; they want to be rich. And that's good. But we want to make sure that there's mechanisms in place that holds people accountable and produces results. Okay? Economy | G20 | International Relations | President Obama | Presidential Press Conference | White House Press Corps Labels: Economy, G20, International Relations, President Obama, Presidential Press Conference, White House Press Corps
Posted by White House Press Corps @ 9:01 PM
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