April 23, 2007
House Passes “Say on Pay” Bill
On Friday, the US House of Representatives passed H.R. 1257 – the “Shareholder Vote on Executive Compensation Act” – by a vote of 269-134. Since the Democrats only hold a 31-seat majority in the House, the vote indicates that the bill attracted some Republican support.
Though the bill passed by a fairly wide margin in the House, the legislation’s prospects of becoming law are uncertain. Senator Barack Obama (D-IL.) has stated that he intends to introduce an identical bill within the next few weeks, where Democrats hold a 51-49 majority- but the bill could have a tough time in committee. The Bush Administration has indicated that it opposes the House bill, as noted below.
Here is an excerpt with more details on “Say on Pay” from ISS’ “Corporate Governance Blog“:
While the White House released a short statement on April 17 expressing opposition to the bill, President George W. Bush has stopped short of saying he will veto the measure if it reaches his desk. The Bush administration said it “does not believe that Congress should mandate the process by which executive compensation is approved.” The White House said recent governance improvements, such as the Securities and Exchange Commission’s new pay disclosure rules, “should be given time to take effect” before additional requirements are imposed.
In response, Frank and other bill supporters emphasize that bill “will not set any limits on pay.” According to Frank’s committee staff, the legislation will ensure that shareholders have an advisory vote on executive pay practices “without micromanaging the company.”
Meanwhile, investors continue to show interest in annual advisory votes on executive pay. On April 17, shareholder proposals at Citigroup and Wachovia won about 43 percent and 40 percent support, respectively, according to the proponent, the American Federation of State, County, and Municipal Employees. The following day, a proposal filed by the Benedictine Sisters received 30.4 percent at Coca-Cola Co., the company reported. So far this season, pay vote resolutions have averaged about 39.7 percent support at six meetings.
Investors at nine companies will vote on the issue next week. Those meetings include Wells Fargo and Merck on April 24; Wyeth, Lockheed Martin, Capital One, and Valero Energy on April 26; and Abbott Laboratories, AT&T, and Merrill Lynch on April 27.
A Few Notes about Possible Timing of SEC Actions
On Friday, the WSJ ran this article – entitled “The SEC’s Mr. Consensus” – in which SEC Chairman Cox indicated that these four regulatory initiatives will be addressed this year, even if a consensus among the five Commissioners is not reached: shareholder access, mutual fund governance, option backdating penalities and modifying Section 404 of Sarbanes-Oxley. The article notes “Mr. Cox plans to leave the agency after the next presidential election.”
According to FEI’s “Financial Reporting Blog, after his internal controls testimony last Wednesday, Chairman Cox told reporters that: “The SEC staff is aiming to make a final recommendation on the management guidance proposal by May 23.”
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