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A press release announcing the action reported in the article below can be viewed on the House Committee web site:


Dow Jones Newswires, March 29, 2007 article


The Wall Street Journal  

March 29, 2007 7:34 a.m. EDT


US House Financial Services Committee OKs 'Say On Pay' Bill

March 29, 2007 7:34 a.m.

   By Siobhan Hughes 

(This article was originally published Wednesday)


WASHINGTON (Dow Jones)--The U.S. House Financial Services Committee, responding to complaints about what investors call excessive executive pay, on Wednesday voted to give shareholders a nonbinding vote on compensation to top public-company executives.

The "say on pay" measure was approved 37-29. Two Republicans, Reps. Paul Gillmor, R-Ohio, and Walter Jones, R-N.C., joined Democrats to vote for the bill. Republicans complained that the measure would distract boards and discourage executives from running public companies. Democrats noted that the bill wouldn't set limits on pay but rather would change the pay-setting process.

"My goal is to give shareholders the power to restrain what I think has been a pattern in which there has been some abuses," House Financial Services Committee Chairman Barney Frank, D-Mass., said. "We're not just talking about individuals. We're talking about I think very responsible institutional shareholders - pension funds, and others."

Under the bill, U.S. public companies would be required to give shareholders a nonbinding, advisory vote on the pay granted to top executives under rules to be developed by the Securities and Exchange Commission. Companies in general have resisted putting such proposals up for a vote through proxies, the company-issued forms that function as ballots in corporate board elections.

The next step is a vote in the full House, which Frank told reporters he expects to occur this spring. The prospects of the advisory-vote bill are uncertain, especially since the Senate Banking Committee's chairman, Christopher Dodd, D-Conn., hasn't indicated plans to push a similar measure through his panel.

The vote comes amid outrage over some large paydays for chief executives. Earlier this year, the outrage came into focus when Home Depot Inc. (HD) disclosed that its chief executive, Robert Nardelli, had agreed to part ways with the company and would receive a $210 million severance package. Shareholders had sought his ouster and pressed for a restructuring of the board, which they blamed for approving big pay for the CEO in spite of the company's flagging share price.

Investors say that an advisory vote would pressure corporate boards to take shareholder interests into account and encourage more dialogue between boards and investors. Executives and some sympathizers in Congress say that such a vote would take away time that should be spent managing a company and discourage some of the best executives from working at public companies.

"Qualified executives will leave public corporations for hedge funds," Rep. Michael Castle, R-Del., said during deliberations last week, "where the salaries are private and they are higher."

Frank and his fellow Democrats spent last week debating Republicans, some of whom used the "say on pay" bill to question whether investors should also have power to vote on pay to other highly paid people, such as trial lawyers and celebrities.

Rep. Steven Pearce, R-N.M., had sought to require companies to let shareholders vote on people who receive payments from corporations greater than $1 million on an annualized basis - even if they don't work directly for the company. Such people would include television personalities like Katie Couric and people such as former President Bill Clinton when they are paid to make corporate speeches, Republicans noted.

"It just seems unfair and it seems like we're stacking the deck against one group of people in favor of another group of people," Pearce complained last week. Frank had said that if lawmakers want companies to disclose more types of pay, they should complain to the SEC, whose rules mandate only the disclosure of pay to the chief executive, chief financial officer, and three other most highly compensated employees.

Investors have been clamoring for an advisory vote in the U.S., as currently exists in the U.K. They hope that even if the House bill fails to become law, it will prompt companies to voluntarily permit advisory votes, as Aflac Inc. (AFL) agreed to do earlier this year.

Another question involves the details of an advisory vote. Because the SEC would implement any rules, some people have wondered how the vote would work. Would shareholders vote on the total pay to top executives? Or, for example, would they simply vote on a section called the compensation discussion and analysis that must be included in company proxies?

Shareholders have made clear that a bigger goal is to gain the right to use company proxy statements to nominate their own board directors. The SEC is currently divided over the so-called proxy-access issue, although SEC Chairman Christopher Cox has said that the commission aims to have in place a rule in time for next year's proxy season.

Frank last week told an investors conference, "I don't think the Congress of the United States is ready to do anything as controversial as board access at this point." He said an advisory vote would be "a kind of a test for the boards of directors."

-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654;

(Kaja Whitehouse and Damian Paletta of Dow Jones Newswires contributed to this report.)

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