The Bush administration is opposing a bill before the House, pushed by Democrats, to give shareholders at public companies a formal say in executives’ compensation packages.
The legislation, written by Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, comes at a time of growing public and shareholder anger over lavish compensation for executives unrelated to their performance. It would give shareholders a chance to cast an advisory vote on executive pay plans, allowing them to show their approval or disapproval of them.
Investor advocates, union pension funds and shareholder groups have been pushing for such “say on pay” votes as the chasm between executives’ salaries and the pay of rank-and-file employees continues to widen.
With Democrats in the majority in the chamber, the bill is expected to pass the House in a vote on Friday. No comparable measure has yet been put forward in the Senate.
Republican lawmakers criticized the legislation in House debate on Wednesday, and the White House registered its opposition.
“The administration does not believe that Congress should mandate the process by which executive compensation is approved,” a statement from the White House said.
Earlier this year, President Bush challenged corporate America on extravagant pay, saying that company managers and directors “must step up to their responsibilities.” He said the government shouldn’t get involved in the matter, however.
Rep. Spencer Bachus of Alabama, the financial services panel’s senior Republican, acknowledged Wednesday that many executive pay packages are outrageous and unjustified. Nonetheless, he said, the House bill “in fact, is a mandate. This is Congress beginning to intrude on corporations.”
New Securities and Exchange Commission rules requiring public companies to provide clearer and more detailed information on their top executives’ pay packages and perks, which recently went into effect, already help shareholders by giving them fuller disclosure, opponents of the bill say.
Opponents of giving investors a vote on executive pay maintain that small groups of activist shareholders could use the process to advance political agendas and create a distraction for boards of directors.
Such shareholder votes are the practice in Britain, Australia and Sweden. Advocates say pay packages are rarely voted down, but the knowledge that they must be voted on has helped keep executive compensation in check overseas.
