House Clears an
Executive-Pay Measure
By KARA SCANNELL and SIOBHAN HUGHES
April 21, 2007
WASHINGTON -- The House overwhelmingly passed a bill
that would give shareholders a greater voice in setting executive
compensation, but a law is far from certain due to opposition by the
White House.
The bill, which passed by a 269-134 margin in the House
Friday, would give shareholders a nonbinding vote on executive pay
packages and a separate vote on any compensation negotiated as part of a
purchase or sale of a company, a so-called golden parachute.
Shareholders wouldn't set pay.
• The
News: The House approves an advisory shareholder vote on CEO pay.
• The
Background: High CEO pay has attracted the scorn of shareholders,
who have pushed for greater influence on pay packages. Business
opposes a 'say on pay' bill, saying corporate-governance improvements
and new executive-pay disclosure rules should have time to take
effect.
• What's
Next: The debate shifts to the Senate, where support is unclear.
If the Senate moves ahead, the White House could veto a measure.
"There are unfortunately a lot of examples of excessive
compensation for CEOs," said Barney Frank, chairman of the House
Financial Services Committee and author of the bill.
Shortly after the bill passed in the House, Democratic
presidential hopeful Sen. Barack Obama of Illinois jumped on the
bandwagon with a promise to introduce what an aide described as an
"identical" bill in the Senate. The senator is expected to take on the
matter over the next several weeks, in an apparent move to get out front
on a populist issue.
An executive-compensation bill "would allow
shareholders to hold executives to similar performance standards that
workers are held to," the Obama aide said.
Rising executive compensation has become a touchy
issue, and could become more central as the presidential race picks up.
In recent years, the gap between the country's rich and poor has widened
by almost every measure, and generous pay packages for executives have
become lightning rods for income-inequality issues.
Whether the bill gains momentum in the Senate is
uncertain. Sen. Christopher Dodd, a Democrat from Connecticut and a
rival of Mr. Obama's for their party's presidential nomination, heads
the Senate Banking Committee, which would process an executive-pay bill
through the Senate. Mr. Dodd said in a statement Friday that the issue
is "important and that he intends "to take a close look at the House
legislation, consider all pertinent views, and then determine the most
appropriate course of action."
Getting Republicans on board may also pose a challenge.
Earlier this year, President Bush spoke out about excessive chief
executives' compensation in his State of the Economy address but the
administration Wednesday said it was against the "say on pay" bill. It
advised lawmakers to give other overhauls time to take effect. These
include a move toward independent compensation committees and new rules
requiring greater disclosure of pay packages.
The House legislation would require the Securities and
Exchange Commission to write rules under which investors could use
company-issued ballot forms to vote on executive pay on an advisory
basis, starting in 2009. The bill builds on SEC rules written last year
that require more disclosure of executive compensation, including a
total compensation number.
The SEC chairman has suggested that a goal was to force
directors to think more carefully about pay, saying that "when people
are forced to undress in public, they will pay more attention to their
figures."
Businesses and investors, such as union-sponsored
pension funds, are sharply divided over the measure. While investors say
the goal is to prod board directors to engage in dialogue with
investors, U.S. companies fret over possible repercussions.
Business is concerned that labor unions could try to
influence executive pay on inequality measures, instead of basing it on
the future financial performance of the company.
Write to Kara Scannell at
kara.scannell@wsj.com3
and Siobhan Hughes at
siobhan.hughes@dowjones.com4
|
