| APRIL 25, 2009
Investors, Take Note:
New Bill to Target Boards, 'Say on Pay'
Sen. Charles Schumer plans to introduce next
week a corporate-governance bill that would give investors an advisory vote
on executive pay and require companies to name independent chairmen and
elect directors annually.
The move is the latest and most comprehensive
push to alter governance practices in the wake of Wall Street's meltdown.
Some provisions in the proposed bill respond to criticism that shoddy
oversight and warped executive-pay practices allowed banks to engage in
risky businesses that later imploded.
"The lack of corporate responsibility and
accountability to shareholders is one of the core problems we face," the New
York Democrat said.
One provision would require the boards of
public companies to appoint special committees to oversee risk management,
according to a draft of the proposed legislation reviewed by The Wall Street
Journal. The Securities and Exchange Commission is considering a rule that
would require boards to disclose their role in managing risk.
Sen. Charles Schumer, at
the Capitol in January, will press for 'corporate responsibility' in a
planned governance bill.
Sen. Schumer's bill also would require public
companies to give shareholders an annual nonbinding vote on their executive
pay practices. Such votes, dubbed "say on pay," are now mandated at roughly
400 firms that received aid from the federal bailout program.
Say-on-pay legislation passed the House of
Representatives in 2007, but stalled in the Senate. House Financial Services
Committee Chairman Barney Frank is working on say-on-pay legislation as
well, and some form of the measure is widely expected to pass this year.
Sen. Schumer also would require companies to
give shareholders a nonbinding vote on severance packages for executives
following mergers or acquisitions.
His bill also would address long-running
investor complaints that it is too easy for company management to stack the
board with friendly directors, and too hard for shareholders to do anything
The legislation would require companies to
hold annual director elections rather than putting only a portion of the
board up to vote each year, as many companies do. It would require directors
to resign if they don't win a majority of shares voted.
The bill also would buttress potential SEC
rules that would make it easier and cheaper for investors to nominate their
own directors. The SEC is considering a number of "proxy access" techniques
and could issue a rule in mid-May.
The bill also would require board chairmen to
be independent directors.
Write to Phred Dvorak at
Kara Scannell at email@example.com
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