CORRECT: House Panel Passes Bill On Executive Compensation Rules
July 28 2009 - 4:59PM
Dow Jones News
U.S. lawmakers, responding to public outrage about outsized Wall
Street pay packages, took the first steps on Tuesday toward setting
new compensation standards for U.S. companies.
The vote in favor of executive compensation legislation by the
House Financial Services Committee gives lawmakers the chance to
partially advance at least a portion of President Barack Obama's
ambitious financial regulatory revamp before adjourning for the
August recess. The House of Representatives is scheduled to vote on
the measure on Friday.
The bill, approved in a 40-28 vote, would give shareholders a
greater ability to weigh in on executive compensation packages and
would ensure that board compensation committees are made up of
independent directors.
In a nod to public frustration with the bailout of Wall Street's
biggest companies, the bill would also single out banks,
broker-dealers, Fannie Mae (FNM), Freddie Mac (FRE) and other
financial companies for additional disclosures of incentive-based
compensation structures. Federal regulators would also be
authorized to restrict "inappropriate or imprudently risky" pay
packages at financial companies, though firms with under $1 billion
in assets would be exempted.
Panel Republicans, led by Rep. Scott Garrett, R-N.J., opposed
the measure and offered a raft of amendments that would have
limited or eliminated large portions of the legislation. The raised
the specter that "federal bureaucrats" would be setting pay levels
for employees and warned that it could discourage recruitment
efforts for companies.
Despite that opposition, the issue puts the GOP in an impossible
situation. Republicans don't want to be seen as on the side of
companies such as American International Group Inc. (AIG) that have
been the source of public outrage over compensation matters.
"It's not to our advantage being up here opposing executive
compensation. It's a very popular thing to go after," acknowledged
Rep. Spencer Bachus, R-Ala.
Democrats rejected the idea that the government would be setting
pay levels. Instead, they said shareholders would have the ability
to have more say on an important issue.
"There's nothing in this bill that allows the government to set
compensation," said Rep. Mel Watt, D-N.C. "Quit trying to hide
behind the government as a big, bad entity."
-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273;
michael.crittenden@dowjones.com