Shareholder Bill Targets Excessive Compensation for Executives
WASHINGTON - The House voted Friday to give shareholders at public corporations a voice in executive pay packages that typically equal 500 times the salaries of workers at those companies.The shareholder vote under the bill would be advisory only. But Democratic backers of this provision said that investors need a say when companies losing money or laying off workers are paying executives eight- and nine-figure salaries and retirement packages.
“This is not an aberration, and there is a hue and a cry from the American people across the American landscape that is saying something must be done,” said Rep. David Scott (news, bio, voting record), D-Ga.
The bill, which passed 269-134 and now goes to the Senate, was opposed by the White House and most Republicans. They argued that the Securities and Exchange Commission has recently taken steps to make corporate pay packages more transparent and that Congress should stay out of corporate affairs.
President Bush earlier this year questioned the extravagant pay of some company managers and directors, but said it was not a matter for government involvement.
“There is no justification for many of these pay packages,” said Rep. Spencer Bachus (news, bio, voting record), R-Ala., top Republican on the House Financial Services Committee. But “this is Congress beginning to intrude on corporations.”
The bill, sponsored by committee chairman Barney Frank (news, bio, voting record), D-Mass., establishes an annual nonbinding vote on executive pay packages and calls for an advisory vote if a company awards a new golden parachute package while simultaneously negotiating the purchase or sale of the company.
Frank noted that the SEC had recently required corporations to include a chart of compensation for top officials but had said it did not have the power to compel a vote on executive pay. He said the bill requires corporations “simply to add to that a box that says ‘I approve/I disapprove.’”
Investor advocates, union pension funds and shareholder groups have supported the legislation, but GOP opponents expressed concerns it would give such groups an inroad to change a company’s policies.
“It greatly worries me that this bill could set a precedent of giving activist institutional investors, who may have their own political and social agendas unrelated to the financial wealth of the companies, more influence,” said Rep. Mike Castle, R-Del.
Republicans unsuccessfully offered amendments requiring pension funds and other shareholder groups to reveal their spending or their votes on compensation issues. Also defeated was a proposal by Rep. Scott Garrett (news, bio, voting record), R-N.J., that would have eliminated the shareholder vote when compensation packages do not exceed averages at comparable companies by more than 10 percent.
Democrats, while stressing that the bill makes no judgment on what is excessive pay, cited studies that the average CEO of a Standard and Poor’s 500 company receives $14.78 million in compensation.
Rep. Brad Miller (news, bio, voting record), D-N.C., said that 15 years ago the average CEO made 140 times what a worker at his company earned but that now the difference is 500 times. He said the aggregate compensation of the top five executives is now 10.3 percent of the corporate profits of public corporations.
Shareholder votes on pay have been adopted in Britain, Australia and Sweden, and advocates say that, while pay packages are rarely rejected, the votes help to keep executive compensation in check.
Sen Barack Obama (news, bio, voting record), D-Ill., introduced a similar bill in the Senate Friday.
The bill is H.R. 1257.
On the Net:
Congress: http://thomas.loc.gov/
Copyright © 2007 The Associated Press.
Corporations are entities that exist only because a stae chaters alow them to. Coporations must abide by this charter or they could receive an “Corporation Death” penalty. Such penalties are rare, but have happened before. This is what I would call government invlovement in corporations.
Bush is again lying to the public. Government has always been involved with corporations - especially subsidies. There shouldn’t be anything wrong with input from the shareholders regarding executive pay.
“There is no justification for many of these pay packages,” said Rep. Spencer Bachus (news, bio, voting record), R-Ala., top Republican on the House Financial Services Committee. But “this is Congress beginning to intrude on corporations.”
Does Mr. Bachus have a better solution while these CEOs continue to give themselves “unjustified” pay packages
at the expense of shareholders and company employees who are earning up to 500 times less? Without underpaid underlings to supply the labor and support the goals of a corporation, there wouldn’t be any corporations.
And let’s not forget that Congress never disputed the Supreme Courts decision in 1886 to give “natural personhood” to corporations, yet corporations are not subject to the same liabilities as a “natural person”. Neither did Congress address how citizens voices have been undermined as result of this decision, due in large part because of their financial advantage to hire lobbyists to convince Congress to pass legislation in the interest of corporations and not the interests of natural born citizens.
Let’s see … The company is losing money, laying off workers and paying executives eight- and nine-figure salaries and retirement packages…and shareholders with their pensions, iras, basically hard earned money, doesn’t have a right to vote on these hugh outlays of money? Could I find some of these shareholders for the corp that I am starting?
Also,why is it alright for the government to get all up in the private citizen’s business but not corportations?
The “Conservatives” arguing that only the Owners (ie. CEO & Board of directors) of a corporation have the right to decide executive compensation are guilty of either Lying or total ignorance.
The CEO & Board of directors are EMPLOYEES of the corporation, NOT the owners. That’s why they receive Paychecks.
The Shareholders are the Owners. That’s why they Buy shares of stock.
So, since these “Conservatives” argue that the Owners should decide, it follows that they should be Supporting this bill, not fighting it.
So, which is it: Lie or Ignorance?
I think there should be some teeth in this legislation. Seems to me that lots of corporate America’s profits come from sending the jobs out to other countries or bringing foreigners in to “temporarily” do the jobs over here. In either case, foreigners are gaining the experience not Americans. How does this not weaken America’s ability to maintain its independence? If we want to develop the next generation defense system but China won’t sell us the componentry, I guess we would just be SOL. How is this modus operandi not potentially hazardous to our nation’s health? If we allow corporate America to continue stripping jobs away from our labor force, we won’t have a labor force. Without an American labor force, corporate America will soon be gone as well. It would be replaced by corporate China, corporate India, corporate Indonesia, etc.
Ever since ths Supreme Court rulled that corporations are persons they have been getting away with murder.
It is not surprising that the White house and the Republicans are opposed to any kind of legislation congress might take since they represent them. It’s about time there are some controlls put on corporations.
All our problems, pick any, environment, war, etc. stems from multi national corporations.
“There is someting wrong with the state interfering with the peaceful operation of what private buisness decides to pay it’s executives, however. It ignores that the owners of the company can decide to change those pay packages at any time they feel they are not warranted.”
Haliburton’s a private business. Are they peaceful? Government intervened on behalf of the airline industry. It’s not like it’s never happened before.
Haliburton is not a private business. It’s a publically traded stock as are the companies in question in regards to this bill. As an investor all I can say is it’s about damn time they tried to look out for shareholders rights for a change.
It’s all a joke, my friends, just another facade. No one in D.C. is going to stop the rape.
the best way to stop big ceo payoffs is to fix the irs tax code to limit the amount a corporation can deduct as a legitimate business expense: if the irs code limits corporations to pay a ceo to only 10 times the pay of a normal entry level employee, anything above becomes nondeductible, they can’t deduct it from business expenses then they have a serious problem with stockholders.
Nader figured out a great solution to corporate pay problems and restraining other corporate abuses in the early 1990s. It is elegant and simple. And Germany has done it to some extent since the 1960s. It is called economic co-determination. It works like this: There are two classes of investors who should exert the most control of corporations: shareholders who contribute their money and employees who contribute their lives. In Germany they way they do it is to give employees mandatory percentage of the seats on corporate boards. It is usually 35 to 45 percent of the seats on the controlling board. Shareholders also have their seats. Nader recommended this via a proposal for legislation that requires a federal chartering of corporations that engage in interstate commerce.
With a significant employee presence on corporate boards the issue of compensation creates a balance between what executives make and what everyone else makes. In the Nader proposal, unions would have seats in proporation to their share of the total employee count.
Charles Derber has proposed the addition of elected seats from the community. See his book “Hidden Power” and also “Regime Change Begins at Home.”
Ask any employee of a big company if they would like to elect their own to their corporate board. Most would like representation.
It is a good way to take the tyranny out of these organizations–organizations which are, after all, created by legislation to begin with.
A federal charter should also include the key 28 words that others have proposed to require social and ecological responsibility in corporate decisions and actions.
Here are the key 28 words:
“The pursuit of profits must not come at the expense of the environment, human rights, public health and safety, the dignity of employees or the welfare of communities”.
http://www.commondreams.org/views04/0726-11.htm
Published on Monday, July 26, 2004 by CommonDreams.org
Is Corporate Social Responsibility an Oxymoron?
by Lois A. Levin and Robert C. Hinkley
Combine economic co-determination in Nader’s proposal with the 28 words–THAT would change things to make the workplace more democratic. Such a change is completely consistent with the progressive platform, including the Green Party Platform and the Kucinich Platform.
In case anyone wants to know what has happened to Germany relative to their respect for employees in the workplace, here are key facts:
To compare simple labor benefits in both countries, look below:
Germany:
http://www.nationmaster.com/red/country/gm-germany/lab-labor&all=1
Working time to buy a car: 861 hours
Working time to buy a refrigerator: 17 hours
Working time to buy a television set: 32 hours
Working time to buy beef: 30 minutes
Working time to buy bread: 7 minutes
Working time to buy chicken: 8 minutes
Working time to buy fish: 36 minutes
Working time to buy milk: 2 minutes
Youth unemployment: 7.7%
United States:
http://www.nationmaster.com/red/country/us-united-states/lab-labor&all=1
Working time to buy a car: 1,459 hours
Working time to buy a refrigerator: 29 hours
Working time to buy a television set: 15 hours
Working time to buy beef: 50 minutes
Working time to buy bread: 14 minutes
Working time to buy chicken: 12 minutes
Working time to buy fish: 58 minutes
Working time to buy milk: 3 minutes
Youth unemployment: 9.3%
The score of the US on the Gini Index is 45. Germany is 28.3. The unequal income distribution favoring the rich and their corporations in the US is worse than in any European country, Canada, Australia, New Zealand, and Japan. The improvement in the distribution of income to favor workers in such countries is a result of a balance of power that does not overly favor the rich or corporations, but includes workers and unions, via policies such as economic co-determination that mandate workers have representation on corporate boards of directors.
More on the Gini Index, is below:
http://www.nationmaster.com/graph/eco_dis_of_fam_inc_gin_ind-distribution-family-income-gini-index
GINI INDEX DEFINITION: This index measures the degree of inequality in the distribution of family income in a country. The index is calculated from the Lorenz curve, in which cumulative family income is plotted against the number of families arranged from the poorest to the richest.
Note the provisions of the bill are not enforceable.
One thing Ralph Nader has been 100% on is that the Democrats and the Republicans are two sides of the same, corporate, coin.
At this point in time corporations exist to convert public wealth, your pensions, into private wealth, CEO paychecks. Politicians and fund managers are bribed lavishly to look the other way.
If you are betting on the stock market to provide your old age income you are in for a nasty surprise. The CEO’s have converted your retirement to private jets and $10 million dollar birthday parties for their trophy wives.
This one is a sure veto. Don’t hold your breath waiting for the over-ride.
The line between governmental power and corporate power is disappearing.
Look at the site:
http://www.opensecrets.org/
It has amounts of money by party, special interest groups, and elected officials.
This administration promised to reduce government. They have done so - but only for the corporations. Their is less regulation than before. Agency budgets have been cut and personnel reduced. For the individual, it is the exact opposite. We are more regulated. For example, the FDA allows big Pharma to dictate medicine and big food to decide what we will eat and how it will or will not be labelled.
Perhaps we should consider our flag and anthem to be only symbolic. A more appropriate anthem would be entitled “Praise the corporation”.
Merely restricting the pay of CEOs is insufficient. It is only the tip of the problem.
“It greatly worries me that this bill could set a precedent of giving activist institutional investors, who may have their own political and social agendas unrelated to the financial wealth of the companies, more influence,” said Rep. Mike Castle, R-Del.”
Last I checked, you can use anything you own in any way you like as long as it doesn’t break laws. But screw ownership, let the Republicans decide what we can and cannot do with what we own! Oh, and wouldn’t you say that pursuit of only financial wealth is an agenda in itself?
Awieber wrote “Last I checked, you can use anything you own in any way you like as long as it doesn’t break laws. But screw ownership, let the Republicans decide what we can and cannot do with what we own! Oh, and wouldn’t you say that pursuit of only financial wealth is an agenda in itself?”
Interesting concept, except that recently what is right is now illegal and what is wrong is legal. This is what happens when criminals are running the till. Every elected office in the nation is for sale to the highest corporate bidders. I think if anyone can do anything to reign in the disparity between Executive and employee wages they have a moral obligation to do so. As for ownership, if it is a public company how does a single CEO own that? I think you need to do some reading on public corporations and then you will understand why eventually they should have their charters revoked.
As hybridoma2001 stated at the top, “Corporations are entities that exist only because a stae chaters alow them to. Coporations must abide by this charter or they could receive an “Corporation Death” penalty. Such penalties are rare, but have happened before. This is what I would call government invlovement in corporations.” So let’s see if you can show me one instance where a corporate charter was revoked in the past 50 years. The real problem with this action is that it only goes as far as the State level. If California revoked the charter of Wal Mart you would see Wal Mart’s all along the border. Unless you have all 50 States sign on for revoking charters then it will be merely a slap on the hand.