WASHINGTON — A House panel voted Tuesday to give shareholders more input on the size of compensation packages awarded to top corporate executives.
House Financial Services Committee Chairman Barney Frank (D-Mass.) introduced the "Say on Pay" measure in Congress this month as part of a broader effort to implement "compensation fairness" at a time when Wall Street salaries and bonuses -- especially those of firms accepting Treasury Department bailout money -- have sparked public outcry.
The legislation would mandate annual shareholder votes on executive compensation at publicly held companies, as well as shareholder votes on executives' severance packages, beginning at the end of this year. But the votes would be nonbinding, allowing companies to ignore them.
The bill would also allow regulators such as the Securities and Exchange Commission to prohibit compensation practices at financial institutions that encourage what advocates say is inappropriate and excessive risk.
"It's a question of empowering the shareholders to decide the appropriate level [of compensation], because it's their money," Frank said in a statement.
The proposed legislation also requires financial institutions to disclose compensation structures that include incentive-based elements.
Upon introducing the bill this term, Frank said the committee was acting on the "broad consensus" of finance experts who believe corporate compensation structures were a factor in the recent financial crisis.
The bill, which passed the committee in a 40-28 vote, was opposed by several Republicans, including ranking member Spencer Bachus (R-Ala.), who objected to government interference in executive compensation.
Several Republican-offered amendments to the bill were defeated in committee.
In 2007, Frank introduced a similar measure requiring public companies to give shareholders an annual nonbinding advisory vote on their company's executive compensation plans and an additional say in golden parachutes.
The 2007 bill was supported by shareholders, workers rights groups and investors, including the California State Teachers' Retirement System. It passed the House by a 269-134 vote but never made it to the Senate floor.
The full House is expected to consider the legislation Friday.