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See also previous version of the article below, published April 20, 2007.


Wall Street Journal, April 21, 2007 article


The Wall Street Journal  

April 21, 2007


House Clears an Executive-Pay Measure

April 21, 2007


WASHINGTON -- The House overwhelmingly passed a bill that would give shareholders a greater voice in setting executive compensation, but a law is far from certain due to opposition by the White House.

The bill, which passed by a 269-134 margin in the House Friday, would give shareholders a nonbinding vote on executive pay packages and a separate vote on any compensation negotiated as part of a purchase or sale of a company, a so-called golden parachute. Shareholders wouldn't set pay.

 The News: The House approves an advisory shareholder vote on CEO pay.
 The Background: High CEO pay has attracted the scorn of shareholders, who have pushed for greater influence on pay packages. Business opposes a 'say on pay' bill, saying corporate-governance improvements and new executive-pay disclosure rules should have time to take effect.
 What's Next: The debate shifts to the Senate, where support is unclear. If the Senate moves ahead, the White House could veto a measure.


"There are unfortunately a lot of examples of excessive compensation for CEOs," said Barney Frank, chairman of the House Financial Services Committee and author of the bill.

Shortly after the bill passed in the House, Democratic presidential hopeful Sen. Barack Obama of Illinois jumped on the bandwagon with a promise to introduce what an aide described as an "identical" bill in the Senate. The senator is expected to take on the matter over the next several weeks, in an apparent move to get out front on a populist issue.

An executive-compensation bill "would allow shareholders to hold executives to similar performance standards that workers are held to," the Obama aide said.

Rising executive compensation has become a touchy issue, and could become more central as the presidential race picks up. In recent years, the gap between the country's rich and poor has widened by almost every measure, and generous pay packages for executives have become lightning rods for income-inequality issues.

Whether the bill gains momentum in the Senate is uncertain. Sen. Christopher Dodd, a Democrat from Connecticut and a rival of Mr. Obama's for their party's presidential nomination, heads the Senate Banking Committee, which would process an executive-pay bill through the Senate. Mr. Dodd said in a statement Friday that the issue is "important and that he intends "to take a close look at the House legislation, consider all pertinent views, and then determine the most appropriate course of action."

Getting Republicans on board may also pose a challenge. Earlier this year, President Bush spoke out about excessive chief executives' compensation in his State of the Economy address but the administration Wednesday said it was against the "say on pay" bill. It advised lawmakers to give other overhauls time to take effect. These include a move toward independent compensation committees and new rules requiring greater disclosure of pay packages.

The House legislation would require the Securities and Exchange Commission to write rules under which investors could use company-issued ballot forms to vote on executive pay on an advisory basis, starting in 2009. The bill builds on SEC rules written last year that require more disclosure of executive compensation, including a total compensation number.

The SEC chairman has suggested that a goal was to force directors to think more carefully about pay, saying that "when people are forced to undress in public, they will pay more attention to their figures."

Businesses and investors, such as union-sponsored pension funds, are sharply divided over the measure. While investors say the goal is to prod board directors to engage in dialogue with investors, U.S. companies fret over possible repercussions.

Business is concerned that labor unions could try to influence executive pay on inequality measures, instead of basing it on the future financial performance of the company.

Write to Kara Scannell at kara.scannell@wsj.com3 and Siobhan Hughes at

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