Obama joins push on executive pay awards
By Jeremy Grant in Washington
Published: April 21 2007 03:00
| Last updated: April 21 2007 03:00
Democratic attempts to give shareholders a greater say in setting executive
pay moved a step forward yesterday when Barack Obama, the party's
presidential hopeful, introduced a bill in the Senate hours after the House
of Representatives approved an identical bill.
The House voted by a margin of 269 to 134 on a bill introduced by
congressman Barney Frank requiring companies to allow shareholders to
approve or disapprove pay awards by means of a non-binding, or "advisory",
Modelled on practice common in the UK since 2002, it is aimed at giving
shareholders influence over what critics say have been increasingly
excessive pay awards to top executives. The issue has not only become
central to Democratic efforts to reform corporate governance in the US, but
has also attracted increasing activism by foreign institutional shareholders
eager to push for similar reforms.
Yesterday it emerged that UK pension fund manager Hermes had for the first
time attached a resolution requiring an advisory vote on pay to a US
Ben LaBolt, spokesman for Mr Obama, said the bill was "identical
legislation" to Mr Frank's. The Illinois senator earlier said his bill would
give "shareholders the power to debate and fight back against exorbitant
Mr Frank, also chairman of the House financial services committee, said his
bill was designed "to further the workings of the capitalist system of the
"It says that the shareholders, the owners of public corporations, will be
allowed to vote every year in an advisory capacity on the compensation paid
to their employees who run the companies."
The Securities and Exchange Commission last year required that companies
improve the way they disclose executive compensation in their annual
proxies. Christopher Cox, SEC chairman, said at the time that "no
shareholder should need a machete and a pith helmet to go hunting for what
the CEO makes".
But Mr Frank said this disclosure was "important, but incomplete". He said
the vote would strengthen the hands of those who had been attempting to give
shareholders some say on pay.
In 2003 the average US CEO got about 500 times the pay of the average
worker, up from a multiple of 140 as recently as 1991, one academic study
The legislation passed by the House also contained a requirement for a
separate advisory vote if a company gives a new, not yet disclosed "golden
parachute" while simultaneously negotiating to buy or sell a company.
While the White House opposes Mr Frank's bill, President George W. Bush in
January warned corporate boards to "step up to their responsibilities" and
tie compensation packages to performance.