WASHINGTON, (Reuters) – The Obama administration yesterday named Kenneth Feinberg, the lawyer who oversaw the  government’s compensation fund for victims of the Sept. 11,  2001, attacks, as its pay czar to police compensation of top  earners at companies receiving “exceptional” government aid.

It also urged new laws to give shareholders more say on how  executive salaries are set and put in place rules to govern pay  at companies getting taxpayer aid, part of a multi-pronged  effort to curb practices it says led to the financial crisis.

The pay packets of top executives, which sometimes are  equal to several hundred times the pay of average employees,  ignited a storm of controversy after the U.S. Treasury rescued  banks and other companies from the brink of collapse by pumping  in billions in taxpayer dollars.

Under the new rules, Feinberg would have broad control over  pay for top executives of the seven firms deemed to be  receiving exceptional assistance — General Motors, Citigroup,  Bank of America, Chrysler, AIG, GMAC and Chrysler Financial.

The rules implement congressional restrictions on bonuses  for senior executives and other top earners at companies that  receive government bailouts.

At the firms receiving exceptional assistance (each of  which has received more than $500 million in aid) Feinberg  would be able to reject pay packages for the five most senior  executives at each firm. He would also have the power to reject  the next 20 most highly paid employees if he finds the  compensation excessive.

Many banks have chafed at curbs on pay that accompanied the  capital injections they received from the government —  restrictions that 10 top U.S. banks will be free of after  winning clearance Tuesday to repay bailout money.

Feinberg’s decisions are to be guided by a set of  principles that weigh the risks being taken by executives, the  potential return for taxpayers, how pay is allocated between  salary and other forms of compensation, comparable pay at other  firms and whether pay is calculated to improve performance.

Separately, U.S. Treasury Secretary Timothy Geithner urged  Congress to give the Securities and Exchange Commission new  powers to affect how executive pay scales are set.

Treasury wants Congress to pass legislation to give the SEC  authority to oblige all publicly traded companies to     give  shareholders a non-binding vote on pay packages for top  executives. It also wants legal power for the SEC to ensure  that internal pay committees, which set pay levels and perks  for company leaders, are more independent from management.

Geithner said the administration’s intent was not to set  pay caps, but to link compensation more closely to a company’s  long-term financial performance.

“We will continue to work to develop standards that reward  innovation and prudent risk-taking, without creating misaligned  incentives,” he said.

SEC Chairman Mary Schapiro told reporters that her agency  was also working on executive compensation rules, but said they  would not dictate particular pay levels.

The administration’s legislative proposals may get a  skeptical response from Congress. Representative Barney Frank,  the powerful chairman of the House Financial Services  Committee, said the proposal to make compensation committees  more independent seems like “a fruitless task.”