Legislation requiring shareholders to ratify executive pay packages could be introduced as early as next week, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said in an interview Tuesday with The Associated Press.
The House bill could pass as soon as April, Frank said. The Financial Services Committee has planned hearings on executive pay for March.
It is likely the proposed legislation would not give shareholders a direct vote on pay, said Frank’s spokesman Steve Adamske. Instead, it would give shareholders a chance to cast a nonbinding confidence or no-confidence vote on reported executive pay, letting them either ratify or say no to the pay package an executive has already received.
Such votes are required in the United Kingdom, Australia and Sweden. Advocates say the pay packages are rarely voted down, but the knowledge they must be voted on has helped keep executive compensation in check in the countries that require a vote.
Aflac Inc., the supplemental life and health insurer, last Wednesday became the first U.S. company to say it would submit its executive pay packages to a vote.
The American Federation of State, County and Municipal Employees has submitted “say on pay” proposals, asking for a nonbinding yes-or-no shareholder vote on pay packages at companies including Citigroup Inc., Wachovia Corp., Ingersoll-Rand Co., Merrill Lynch & Co. and Countrywide Financial Corp.
About 10 companies, including Pfizer, Intel Corp., Bristol-Myers Squibb Co., Schering-Plough Corp., American International Group Inc., JPMorgan Chase & Co. and Colgate-Palmolive have formed a working group with AFSCME and Walden Asset Management to discuss shareholder approval of pay packages. Walden Asset Management, which manages about $1.5 billion, advertises itself as an investment company that works for social change.
Frank said other issues he plans to tackle include subprime mortgages and income inequality.
On subprime mortgages, or home loans to people with blemished or limited credit histories, he said the committee would address “no-document” mortgages, where the borrower doesn’t have to prove income, but added, “I don’t think this is mostly driven by sneaky borrowers lying about how much money they have; it’s driven by unscrupulous lenders taking advantage of unsophisticated people.”
Frank also said lawmakers could work to narrow income inequality by strengthening the role of unions, passing a higher minimum wage, adopting universal health care and changing the tax code, particularly provisions that benefit primarily wealthy tax payers, such as capital gains and dividend tax cuts.