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Friday, February 12, 2010

CRS Issue Statement on Corporate Financial Integrity

Gary Shorter, Coordinator
Specialist in Financial Economics

Mark Jickling
Specialist in Financial Economics

Michael V. Seitzinger
Legislative Attorney

Kathleen Ann Ruane
Legislative Attorney

Rena S. Miller
Analyst in Financial Economics

The financial crisis has resulted in several federal interventions in support of various banks; other financial firms, including AIG, Fannie Mae, Freddie Mac, and GMAC; and automakers, such as General Motors and Chrysler. Both Congress and the Administration are interested in crafting financial regulatory reforms aimed at averting future financial collapses. 

Some argue that compensation structures at major financial institutions encouraged excessive risk taking. Both Congress and various financial regulators are considering regulatory reforms meant to discourage financial firm pay packages that may lead to excessive risk taking. A related reform that is also receiving congressional consideration involves requiring public companies to give their shareholders a non-binding vote on their executive pay packages, known as say on pay. Congressional concerns over the potentially harmful long-term impact of financial firm compensation schemes have extended to broader concerns over the accountability of the public company boards of directors, responsible for awarding executive pay. Congress is also considering reforms that would make it easier for large investors to nominate their own directors to corporate boards, known as proxy access.

Date of Report: January 20, 2010
Number of Pages: 3
Order Number: IS40289
Price: $7.95

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