Thursday, March 29, 2007


Congress Empowers Shareholders To Give Thumbs Down To CEO Pay Raises

The House Financial Services Committee just approved legislation to allow shareholders "advisory votes" on executive compensation - and on "golden parachute" packages, should the executives be leaving the company. The legislation does not set explicit limits on executive pay, but does grant shareholders the means to express their disapproval of excessive compensation. Moreover, according to committee chairman Barney Frank, "if boards of directors ignore shareholder votes against their pay practices, Congress may move to give shareholders direct access to nominating directors..." The committee approved the legislation by a vote of 37 to 29, and the yea-sayers included at least two Republicans. Barney Frank said, "We have taken an important step in giving shareholders the ability to express their approval or disapproval of pay packages for executives to run the corporations that they own." The legislation will go into effect in 2009.

According to the article at the link below, shareholder votes on executive pay have successfully reined in CEO compensation in nations like Australia, Sweden and the United Kingdom. The legislation has its critics however - from predicable sources. Republican opponents of the legislation claimed that "small groups of activist shareholders could use the process to advance political agendas and create a distraction for boards of directors." Corporate running dog Dick Armey remarked, "Salaries should be set by market forces, not government regulation. Representative Frank's proposal has a high demagoguery quotient, but does little for public policy. What will we hear from Financial Services Committee next, that the government is setting salaries for professional athletes?" Despite the fact that the issue of executive pay "strikes a nerve" with millions of Americans who have been blindsided by flat wages and layoffs, it is remarkable how clueless so many Republicans remain.

"House OKs Executive Pay Bill" from Time
"House Financial Services Committee Passes Shareholders Vote on Executive Compensation Act" from RTO Online
"Executive pay vote bill advanced" from Investment News

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