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House votes to rein in 'excessive pay' for company execs

Democrats say such a measure could have helped avert the financial crisis. Republicans and big business call it a bureaucratic power grab.

By Staff writer / July 31, 2009

Mary Altaffer/AP/File

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Washington

In its last vote before its August recess, the House Friday passed a high-visibility bill to give shareholders and federal regulators a stronger hand in curbing excessive or risky executive compensation.

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The “say-on-pay” bill picks up a major theme of the Obama administration. It’s the first step toward an overhaul of financial services regulation, expected in the fall. It also responds to voter anger over federal bailouts, launched in the last months of the Bush administration, seen as asking too little of banks.

The bill, which passed on a largely party-line vote, gives shareholders an annual, nonbinding vote on executive pay packages. It also requires that compensation committees be independent of management. In a more controversial move, the bill also expands federal regulatory powers to curtail a pay package if it is deemed to threaten the health of a company or have “serious adverse effects on economic conditions or financial stability.”

“Had we had this bill in place three years ago, we might not have had this financial crisis,” said Rep. David Scott (D) of Georgia. All Democrats and two Republicans voted for the bill. But House Republicans, who voted against the bill with only two exceptions, said that the broad language in the bill would it gave “unelected bureaucrats” broad scope to intervene in compensation decisions well beyond Wall Street.

Needed regulation vs. attack on free enterprise

“It’s a sweeping power grab into the private sector under the guise of the government riding to the rescue,” said Rep. Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee.

It would give government a “stranglehold” over the free enterprise system, discourage private firms from going public, and “create a bonanza for trial lawyers, added Rep. Pete Sessions (R) of Texas.

Industry groups such as the National Association of Manufacturers opposed the bill as an overreach into private business decisions.