June 10 (Bloomberg) -- The Obama administration will seek new powers for the Securities and Exchange Commission to force firms to let shareholders vote on executive pay and make directors who set compensation more independent, an administration official said.

Today’s proposal, subject to congressional approval, would cover all public companies. President Barack Obama has long supported giving shareholders nonbinding votes on bonuses, salaries and severance packages. The administration also will name a “special master” to monitor compensation plans for firms receiving exceptional assistance in the financial rescue.

The changes are aimed at reducing systemic risks and quelling a political uproar over bonuses paid to executives whose companies were bailed out by the government. Treasury Secretary Timothy Geithner has repeatedly blamed pay standards tied to short-term profits for contributing to the worst financial crisis since the 1930s.

“It clearly is going to force companies to be more transparent with their disclosure” on compensation, said Irv Becker, national practice leader for Philadelphia-based Hay Group’s executive compensation practice. If the measure is implemented, it likely will take several years before shareholders begin to confront management, he predicted.

“It’ll kind of be novel the first year, maybe the first two, and then likely be a little bit more serious in future years,” said Becker, a former head of compensation and benefits at Goldman Sachs Group Inc.

Treasury Meeting

Geithner is scheduled to meet today with SEC Chairman Mary Schapiro, Federal Reserve Governor Daniel Tarullo and executive- compensation specialists at the Treasury.

The Treasury chief said yesterday that the Fed and other bank regulators will define “standards and principles that supervisors would use to help bring about reforms in compensation practices in the financial industry.”

“A centerpiece of sensible reforms will be to tie compensation to better measures of long-term investment and return, and to adjust them to reflect the risk” incurred by executives’ decisions, Geithner said during a hearing at a Senate Appropriations subcommittee.

Changing executive pay practices is part of a broader initiative by Obama to overhaul U.S. financial rules in the aftermath of the crisis. Obama will unveil his “series of specific proposals” streamlining and reorganizing regulation on June 17, White House spokesman Robert Gibbs said.

Regulation Overhaul

The Treasury will name Washington lawyer Kenneth Feinberg to review compensation at companies that have received infusions of government capital, the official said. Feinberg, who works as a mediator, is expected to take the job without pay.

Feinberg is retained by corporations, insurers, government agencies and courts to help settle cases. He’s best known for being named the special master of the September 11th Victim Compensation Fund, which made payments to the victims of the terrorist attack.

Geithner has been a proponent of so-called say-on-pay rules since taking office. In a May 18 speech in Washington, he said that giving shareholders a vote on compensation would bring a “kind of disclosure that can help a lot.”

In developing the executive compensation rules, the Treasury must reconcile the Obama administration’s initial pay policy with measures since enacted by Congress.

Senate Banking Committee Chairman Christopher Dodd added a provision to the $787 billion stimulus legislation passed in February that tightened pay restrictions at firms that took government capital, while also making it easier for banks to repay their aid to escape the new regulations.

Dodd’s Measure

Dodd’s provision restricts bonuses for senior executives and the next top 20 employees at companies getting more than $500 million from Treasury’s financial-rescue fund. Limits on bonuses apply to other companies on a sliding scale based on how much assistance they received.

The Obama administration’s original proposal, released Feb. 4, limited salaries and required bonuses to be paid in restricted stock. This was intended to provide incentives for bank executives to consider firms’ longer-term interests, without setting an overall cap on compensation.

Geithner hasn’t said how he plans to reconcile the two policies, other than to say that the Treasury will implement the law.

The Wall Street Journal reported that the administration intends to drop its own proposals and just leave the firms that received federal rescue money subject to the Dodd measures, citing people it didn’t name. Bank of America Corp. and Citigroup Inc. are among the firms that continue to have government shares.

To contact the reporters on this story: Jesse Westbrook in Washington at jwestbrook1@bloomberg.net; Robert Schmidt in Washington at rschmidt5@bloomberg.net; Rebecca Christie in Washington at Rchristie4@bloomberg.net

Last Updated: June 10, 2009 11:34 EDT