A bill that would give shareholders the right to cast non-binding votes on executive pay sparked sharp comments Thursday at a subcommittee hearing in Washington.
Backers say the measure, introduced last week by Rep. Barney Frank, D-Mass, is needed to prevent fraud. But opponents say it would interfere with the free working of American companies and force executives to spend more time meeting with advocacy groups and less time on product development.
“Businesses were never designed to be democracies and their decision-making process was not established to be run like a New England town hall meeting,” John Castellani, president of The Business Roundtable, told the committee.
But Richard Ferlauto, a representative of the American Federation of State, County and Municipal Employees (AFSCME), said the measure is needed to clean up U.S. corporations.
"Incentive to Manipulate"
“Spiraling pay, not based on performance, tends to provide an incentive to manipulate earnings, obfuscate financials and, unfortunately in many cases, to cook the books,” he said.