House panel backs giving investors "say on pay"

kilua SG

http://www.washingtonpost.com/wp-dyn/content/article/2007/03/28/AR2007032801799.html

House panel backs giving investors "say on pay"

Reuters
Wednesday, March 28, 2007; 5:35 PM

WASHINGTON (Reuters) - U.S. shareholders would gain the right to cast nonbinding, annual votes on the pay levels of corporate executives under a bill approved on Wednesday by a House of Representatives committee.

With American CEO pay soaring, the "say on pay" bill passed in the House Financial Services Committee, sending it to the full House for further consideration.

No similar measure is moving through the Senate, although lawmakers there are looking into other possible ways of giving shareholders more clout on corporate boards of directors.

The House bill was introduced by Massachusetts Democrat Barney Frank, chairman of the committee.

His bill would allow shareholders to vote each year on executive pay as outlined in the proxy statement, a document distributed annually to investors by corporate management.

It would also give shareholders a vote on any "golden parachute" packages for executives if a company is sold

the Bear SG

this is corporate.. wondering why the house committee over there is dabbling in it..

also wondering what this has to do with anything at all?

kilua SG

US expected to restrain executive pay

http://www.smh.com.au/news/business/us-expected-to-restrain-executive-pay/2007/03/09/1173166980733.html

INVESTORS should be seen but not heard when boards of directors are setting salaries for top executives, John Castellani, president of the Business Roundtable, told US Congress on Thursday.

"Corporations were never designed to be democracies," said Mr Castellani, whose organisation represents chief executives of large US companies. "While shareholders own a corporation, they don't run it."

But many members of the House Financial Services Committee voiced support for the legislation to restrain executive compensation. The bill would allow shareholders to take an annual non-binding vote to express their approval or disapproval of executive pay plans.

Committee chairman Barney Frank, a Democrat from Massachusetts, introduced the bill on March 1 in response to shareholder advocates who have been calling for "say-on-pay" votes to dampen the growth of compensation packages.

Mr Frank said such votes would discourage excesses without imposing heavy regulation. "There have been past efforts to have the government set salaries," Mr Frank said. "That would be a mistake."

Bill co-sponsor David Scott, a Democrat from Georgia, said he supported say-on-pay votes because compensation had become "dangerously outsized." With CEO pay rising far more rapidly than average wages, "rank and file employees are being left behind," he said.

In 2005, annual median CEO pay in the US was $US13.5 million ($17.4 million), up 16 per cent from 2004, according to Corporate Library, a research group.

Harvard Law School Professor Lucian Bebchuk said that in 2003, the average CEO got about 500 times as much pay as the average worker, compared with a multiple of 140 in 1991.

In a number of countries, including Britain, Australia and Sweden, shareholders already vote on executive compensation.

But in the US, where private-equity funds often generate lavish compensation for top executives, the "hounding of public-company CEOs may have a major cost," University of Chicago professor Steven Kaplan said.

"CEOs can and will leave public companies to do something else. And it is the better CEOs who will tend to do so."

Many Republicans expressed worries about CEO pay, if not outright support for the bill intended to head off such pay for poor performance.

"I am troubled by news media reports of enormous compensation packages for corporate executives, especially when they seem to reward incompetence," said Spencer Bachus of Alabama, the senior Republican on the committee.

"Lavish executive compensation packages for CEOs have contributed to the growing public perception - justified or not - that the rules in corporate America are rigged in favour of well-insulated insiders."

The House committee is expected to approve the legislation at a March 21 meeting.