The House of Representatives approved Barney Frank’s “Say on Pay” bill this afternoon. The bill would give public-company shareholders annual non-binding votes on executive salaries.
The supporters of the bill make no bones about viewing it as a way to stem the rise in executive pay. Opponents point out that ordinary shareholders will often lack an incentive to vote on the measures, and will be unlikely to have the relevant information to decide on the appropriateness of executive pay. The executive compensation elections will most likely be controlled by self-interested special interests who do not necessarily share the interests or incentives of the broader shareholding public, opponents say. Studies into public ignorance have revealed to electorates are usually characterized by large groups of relatively ignorant and apathetic votes who wind up ceding control to smaller, doctrinaire and self-interests cliques. Some opponents raise the specter of union controlled pension funds using its voting power to win union concessions from management.
But those opponents aren’t opposing enough, perhaps because they aren’t listening closely enough to Barney Frank. Frank has made it very clear that this is an incremental step toward a measure that would make shareholder votes on executive compensation binding. Just this morning on Squawk Box, he told Carl Quintanilla that if corporate board’s don’t follow the results of these supposedly non-binding votes, then Congress might just have to make them binding.
“I don’t think boards of directors are going to ignore people,” Barney Frank said. “If we try this out and it turns out there is a widespread pattern of boards ignoring shareholder votes the we will probably change it.”
So the shareholder votes are non-binding unless boards don’t let the outcomes bind them. That’s some kind of non-binding provision.
On the positive side, Blackstone's IPO is looking even more attractive.
House OKs Bill to Give Investors Say on Executive Pay [Bloomberg]
Shareholder Say on Pay [CNBC]
Posted by , Apr 20, 2007 4:23PM
Reason #1 why private equity may have a number of strong years ahead of it