Bill to require shareholder vote on executive compensation introduced
March 2, 2007
Barney Frank, a member of the United States House of Representatives and chairman of the House financial services committee, has introduced a bill that would make require public companies to let shareholders vote on pay for company executives. The votes, which would be non-binding and advisory only, would be included with annual proxies sent to shareholders.
The bill comes as companies are getting ready for their annual meetings and at a time when executive compensation has become an issue with the public and likely will be on shareholders’ minds. Pensions funds and unions have been advocating for such advisory votes as a way of allowing shareholders to express their opinions about whether pay for top executives is appropriate to performance of their duties.
Critics of Mr. Frank’s bill say that an attempt to give shareholders any kind of say over executive compensation should wait until some indication of how new rules issued last year by the Securities and Exchange Commission affect executive pay packages. The rules require companies to disclose a single figure summary of executives’ compensation as well as a “narrative” that explains how compensation committees decided what to pay the executives. Mr. Frank has called the SEC rules a step in the right direction, but that he thinks the required disclosure is not enough.