Obama and Financial Pay

From Wall Street Journal article:

"The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money, according to people familiar with the matter. The initiative, which is in its early stages, is part of an ambitious and likely controversial effort to broadly address the way financial companies pay employees and executives, including an attempt to more closely align pay with long-term performance. Administration and regulatory officials are looking at various options, including using the Federal Reserve's supervisory powers, the power of the Securities and Exchange Commission and moral suasion. Officials are also looking at what could be done legislatively."

Is this right? Is it legal? It is clear that executive pay has gotten out of hand, but is the correct way to remedy the problem to have government use laws or "moral suasion" to dictate pay? This seems to be the first steps down a slippery slope. These are private companies owned by shareholders who dictate executive pay.