Earlier we mentioned the FDIC might take on executive pay.

Now the FDIC is asking for comments on this proposal.

The FDIC is seeking comment on how these types of risks should be accounted for when setting an institution’s risk-based assessment.

Employee compensation programs have been cited as a contributing factor in 35 percent of the reports prepared in 2009 investigating the causes of insured depository institution failures and the associated losses to the DIF.

Bloomberg reports the FDIC board vote.

A divided FDIC board today voted 3-2 to seek public comment, as the regulators for national banks and savings and loans said it was premature and unnecessary because other regulators are acting. The vote sets the stage for possible adoption of a rule later this year.

“We have been told that the industry has reformed past excesses, notwithstanding the fact that pay and bonus packages in many cases seem to have reached pre-crisis levels,” FDIC Chairman Sheila Bair said at the meeting. “This is clearly a contributor to the crisis and to the losses we are suffering.”

Regulators are seeking to curb executive compensation practices that encourage excessive risk taking. The Federal Reserve in October proposed guidelines on pay practices, saying lenders could make pay more sensitive to risk by delaying a bonus payment or extending the period covered by performance measures.

Calling all experts and bloggers, let's really comment and try to get a real system into place to curb executive compensation and tie it into the corporate interest as well as the national interest.

The vote was 3-2 to even put up a request for comments, but one must try.

Here is what the proposal framework is:

The proposal would let the agency assess risks from a bank’s compensation plan in determining the premium paid by the lender to support the FDIC’s deposit insurance fund. Banks with practices aimed at limiting risks would pay less in fees, and higher premiums would be imposed on banks with practices the regulator deems risky. The agency is acting under its authority to protect the fund, which was drained by 165 bank failures in 2008-2009.

The FDIC proposal is intended to influence the structure of pay arrangements, not to set compensation levels, Bair said.

The FDIC will consider how to set premiums for the insurance fund based on the risks of compensation programs and how to provide incentives for banks to use practices that reward employees for focusing on risk management, according to a staff memo.

The bank regulator will seek comment on whether employees whose work can pose significant risk should receive a large portion of their compensation in restricted, non-discounted company stock, according to the memo.

The agency also will ask whether significant awards of stock should become vested over several years and be subject to a claw back designed to account for the outcome of risks assumed in earlier periods, and whether a committee of the board composed of independent directors administer the employee compensation program.

So, one might look at FDIC as a risk assessment scale but this appears to be an open window to influence executive compensation restructuring.

Recall executives get 33% of all pay in the United States. We have numerous studies, two here and here showing executive compensation is not only decoupled from the national interest but the corporation's interest as well.

We also have many exceptional policy recommendations on executive compensation as well as corporate governance. Maybe this is a window to get some of these proposals adopted?

The actual FDIC proposal and call for comments is attached to this post. There are 15 questions in the document asking for comment on precisely how to asses FDIC fees based on what kind of compensation structure is implemented at each financial institution under the FDIC purview.