The Shareholder ForumTM


"Say on Pay" Proposals

Forum Home Page

"Say on Pay" Home Page

Program Reference


For the House bill referenced in the report below, see


Bloomberg, July 31, 2009 article




U.S. Limits on Bank Pay, Bonuses Face Senate, Obama Skepticism


By Ian Katz and Jesse Westbrook

July 31 (Bloomberg) -- Restrictions on financial industry bonuses heading to a vote in the U.S. House may be rejected by the Senate and the Obama administration, which are reluctant to increase government’s role in deciding compensation.

The House, emboldened by New York Attorney General Andrew Cuomo’s report yesterday that showed nine banks getting U.S. aid paid $32.6 billion in bonuses last year, will probably pass a bill requiring regulators to ban pay practices that encourage “inappropriate risks.” A panel in the House, where Democrats hold a 256-178 advantage, approved it along party lines July 28.

The bill must pass the Senate and be signed by President Barack Obama to become law. White House press secretary Robert Gibbs, who hadn’t read Cuomo’s report, said yesterday the administration is concerned the measure may give regulators too much say on incentive pay. Michael Oxley, former chairman of the House Financial Services Committee, said senators are more likely to back the say-on-pay measure that gives investors a non-binding vote on compensation.

“It is difficult for me to believe that the Senate would be particularly interested in passing that version, despite the report,” Oxley, co-author of the Sarbanes-Oxley corporate governance law, said in an interview. “I don’t think it’s going to influence the Senate.”

AIG Outrage

The House in March passed a bill to set a 90 percent tax on bonuses at companies getting at least $5 billion in aid. The legislation, responding to public outrage over retention bonuses at American International Group Inc., died in the Senate after Obama said the U.S. shouldn’t “govern out of anger.”

Public outrage over Wall Street compensation reignited after Goldman Sachs Group Inc. set aside $11.4 billion for compensation and benefits for the first half of this year, a 33 percent rise from a year earlier and enough to pay every worker $386,429 for that period.

Cuomo analyzed 2008 bonuses at banks that received $175 billion in U.S. aid and found that 4,793 employees were paid more than $1 million in bonuses last year. The 51 members of Citigroup Inc.’s senior leadership committee got an average of $4 million each, according to Cuomo.

The report underlines “why we’re trying to pass this bill,” House Financial Services Committee Chairman Barney Frank said yesterday in an interview. “This is precisely the kind of thing that should be subject to legal restriction.”

Tougher to Stampede

The House measure goes further than administration proposals to regulate compensation. It bars incentive-pay plans that “could threaten the safety and soundness of covered financial institutions,” or that “could have serious adverse effects on economic conditions or financial stability.”

The Senate wouldn’t take up the measure until it returns from its recess, which begins Aug. 10 and ends Sept. 7.

“History teaches us that it is a lot tougher to stampede the Senate than the House,” said John Olson, a partner at the Gibson, Dunn & Crutcher law firm in Washington. “If Mr. Cuomo was playing federal politics and trying to influence the Senate, he would have released this report after Labor Day.”

The rules, with details to be set later, would cover every U.S. financial institution with at least $1 billion of assets. In addition to banks, credit unions and other financial companies, it also may cover hedge funds.

‘Tread Lightly’

“We should tread very lightly,” said Senator Mark Warner, a Virginia Democrat, speaking before Cuomo’s report was released. Banks might avoid congressionally mandated pay restrictions if they can set the “right standards” and then be willing to engage in self-policing, he said.

Hedge funds and other money managers should be exempt from limits because “if you think you are paying too much you can take your money out,” said Phillip Goldstein, principal at Bulldog Investors in Saddle Brook, New Jersey. “It’s the same thing with baseball. You see the price on the tickets and if you think it’s too much, don’t go to the game. I can’t believe anybody who took Eco 101 could support this.”

Goldstein won a court decision in 2006 throwing out an SEC rule requiring fund managers to provide information such as their business address and assets under management.

“If this is going to be an issue, then as soon as Congress started handing out the money they should have been there to say that when it comes to compensation, we want to be party to this,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which manages $13.8 billion including shares of Citigroup, Goldman Sachs, JPMorgan Chase & Co. and Wells Fargo & Co.

To contact the reporters on this story: Ian Katz in Washington at; Jesse Westbrook in Washington at;

Last Updated: July 31, 2009 00:01 EDT





This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.