In the “Aflac” article we pointed out that the pension funds were exerting significant lobbying pressure on the US congress to introduce a non-binding vote on executive pay. The bill, H.R. 1257, the “Shareholder Vote on Executive Compensation Act” will not set any limits on pay, but will ensure that shareholders have an opportunity to give their approval or disapproval on the company’s executive pay practices.
No Republicans have endorsed Frank’s bill. But with the Democrats now the controlling majority in the House after the November elections, he says he expects House passage as soon as April.
A month ago, President George W. Bush challenged corporate America on extravagant pay, saying that company managers and directors “must step up to their responsibilities.” He said the government shouldn’t get involved in the matter, however.
This followed moves by new regulations introduced by the SEC that require companies to better disclose all elements of compensation in a summary table, and explain the philosophy and principles as to how this compensation was arrived at. The regulations are in effect remarkably similar (although about 40 times more detailed, judging by the number of pages involved) to Australia’s disclosure law.
Unfortunately the move in the US to introduce methods currently employed by Australia, the UK, Sweden and the Netherlands will still not get the corporate governance balance right, given the heavy handed nature of the Sarbanes Oxley Act, which will co-exist with this new bill if (and that is still a big “if”) it eventually becomes law.