U.S. House Passes Bill Granting Shareholders Vote on Executive Pay

April 20, 2007

The U.S House of Representatives today passed by a vote of 269 to134 legislation to allow shareholders of public companies to approve or disapprove of a company’s executive compensation plans.

H.R. 1257, the “Shareholder Vote on Executive Compensation Act,” will not set any limits on pay, but, its backers maintain, will ensure that shareholders have a nonbinding and advisory vote on their company’s executive pay practices without micromanaging the company.

The legislation passed by the House today 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.

“This is a bill to further the workings of the capitalist system of the United States. It has one very specific provision, it says that the shareholders, the owners of public corporations, will be allowed to vote every year in an advisory capacity on the compensation paid to their employees who run the companies,” said Rep. Barney, D-Mass., chairman of the Financial Services Committee. Frank introduced the bill last month.

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 began requiring that public companies improve their executive compensation disclosures to shareholders.

Source: House Financial Services Committee
For more information on H.R. 1257, the “Shareholder Vote on Executive Compensation Act,” please visit: http://financialservices.house.gov/ExecutiveCompensation.html .

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