"I think this was a good first step," said Nell Minow, editor of the Corporate Library, a governance research firm. "The administration doesn't want to set anyone's pay, but they take this issue very seriously and understand that something is very wrong."
But Claudia Allen, chairwoman of the corporate governance practice at the Chicago law firm of Neal, Gerber & Eisenberg, said that the Obama administration was wading into complicated territory.
"My sense is they are trying to find something that responds to populist outrage while balancing that against the need to retain key executives," she said. "The practical reality is that it's hard to legislate compensation."
Indeed, such efforts have backfired in the past, Minow said. A 1993 law that sought to limit salaries to less than $1 million, for example, was passed at a time when the average salary was $750,000. Almost immediately, average salaries were boosted to the cap and then companies proceeded to issue huge stock option awards, leading to the run-up in pay we see today, she said.
"In the museum of unintended consequences, that law is Exhibit A," Minow said.
But Geithner stressed that the administration was not seeking to cap how much executives would be paid.
"We do not believe it's appropriate for the government to set caps on compensation," he told reporters after meeting with SEC Chairwoman Mary L. Schapiro and Federal Reserve Gov. Daniel Tarullo.
The administration will also propose legislation to give the SEC power to ensure that compensation committees are independent in ways similar to corporate audit committees and that they have the ability and the money to hire independent compensation consultants and outside counsel.
In 2007, the House approved legislation from Frank to provide shareholders with an advisory vote on executive compensation. But the measure, which was opposed by the Bush administration, never came up in the Senate.
Sen. Charles E. Schumer (D-N.Y.) has introduced a sweeping "shareholder bill of rights" that includes a requirement for say-on-pay votes. And with larger Democratic majorities in Congress and Obama in the White House, Frank said he was optimistic legislation would be passed.
But some Republicans strongly oppose the measures.
"Compensation is and should be an inherently private matter between an employee and an employer," said Rep. John Campbell (R-Irvine).