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House dukes it out on exec comp bill

By Sara Hansard

March 8, 2007 3:37 pm ET

Requiring advisory shareholder votes on executive pay packages is necessary and would make U.S. markets stronger, Democrats and proponents of legislation that would mandate such a vote said today at a House Financial Services Committee hearing.

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But Committee Chairman Barney Frank, D-Mass., the author of the legislation, denied that he is attempting to set corporate salaries.

The legislation is simply “enhancing the ability of shareholders to vote on the salaries of those they employ,” he said.

Mr. Frank and other Democrats on the committee deplored what multi-million dollar pay packages for executives at companies that have not performed well, and insisted that corporate pay be linked to company performance.

“The average CEO of the United States makes 250 times the pay of an average worker,” said Rep. Al Green, D-Texas.

The average large-company CEO made 500 times the amount of the average worker, he said. “We want the market to set how much folk ought to receive as compensation,” he said.

Republicans argued that the bill could lead to other more intrusive measures as well as unintended consequences.

Ranking committee member Spencer Bachus, R-Ala., acknowledged that he is worried that huge executive pay packages could be diverting corporate resources from research, new equipment, job training and other spending that could enhance U.S. long-term competitiveness.

But, Mr. Bachus said, “I have an abundance of caution because of the government’s track record in ‘fixing things.’”

He and other Republicans argued that executive compensation disclosure rules adopted last December by the Securities and Exchange Commission should be given a chance to work in the market.

Union pension director Richard Ferlauto supported the bill, but he said he would “gladly trade” passage of the measure for the right for shareholders to have direct access to proxy votes for corporate directors.

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