Bill would control CEO pay
By GREG FARRELL
USA Today
In response to public revulsion over the astronomical pay packages awarded to some chief executive officers, a House Democrat introduced legislation last week that would force companies to let their shareholders vote on executive compensation.
Citing statistics showing that CEO salaries rise dramatically even when a company performs poorly, Rep. Barney Frank, D-Mass., said more disclosure of executive compensation was necessary.
"This bill does not dictate pay levels for corporations," he said. "It sets rules for public corporations about how to go about things."
Frank's proposed legislation calls for large public corporations to include detailed summaries of CEO pay contracts in the annual proxy statements sent to shareholders. Shareholders would then have to approve those contracts. The summaries would include:
Frank said this portion of his proposal was designed to force CEOs to give back any bonus payments they received for hitting their numbers in a particular quarter if the results that quarter subsequently had to be restated.
This portion of the bill was based, in part, on the fact that former Fannie Mae CEO Frank-lin Raines was allowed to keep some of his incentive pay for hitting his target numbers even though the company eventually announced a $9 billion restatement.
Nell Minow, editor of the Corporate Library, a corporate-governance watchdog group, praised the bill. "What's sexy about this legislation is that for the first time, it gives shareholders some veto power," she said. "If you look at people whose pay is in the stratosphere, they are movie stars, rock stars, athletes, investment bankers and CEOs.
"One of these things is not like the other. The first four are paid for their performance. Why is it that CEOs are the only ones who have absurd contracts? They're not negotiated in arm's-length transactions."
The Securities and Exchange Commission is expected to propose rules requiring fuller disclosure of CEO compensation early next year.
