House Financial Services Committee Chairman Barney Frank, joined by 21 other members of Congress, today introduced legislation to require public companies to include in their annual proxies a non-binding advisory shareholder vote on their executive pay plans.
The bill, H.R. 1257, the “Shareholder Vote on Executive Compensation Act” will not set any limits on pay, but will ensure that shareholders have an opportunity to give their approval or disapproval on the company’s executive pay practices.
The bill also contains a separate advisory vote if a company gives a new, not yet disclosed, “golden parachute” while simultaneously negotiating to buy or sell a company.
Advisory votes on compensation have been used in the United Kingdom and recently adopted voluntarily by the company AFLAC.
“I do not understand those who argue that the people who make up our stock markets are collectively very wise, but at the same time are somehow incapable of rendering a coherent opinion of what they should pay those they employ to run the corporations that they own,” said Rep. Frank.
Specifically, the legislation builds on the Securities and Exchange Commission’s (SEC) executive pay disclosure rules to require that public companies include in their annual proxy to investors the opportunity to vote on the company’s executive pay plans.
Last year, the SEC required that public companies improve their executive compensation disclosures to shareholders. Frank said he believes that disclosure is important, but incompleteand that his legislation would “ensure that shareholders have a say on their company’s executive compensation disclosures without micromanaging the business.”
The House Financial Services Committee will testimony on this issue at the hearing on the legislation on March 8, 2007, at 10:00 a.m. in the Rayburn House Office Building, room 2128.
Source Rep. Barney Frank, Chairman
House Financial Services Committee