Rep. Barney Frank, D-Mass. and chairman of the House Financial Services Committee, told CNBC’s “Squawk Box” that a bill requiring publicly held companies to hold advisory votes on executive pay is a “moderate” piece of legislation and would cause no harm.
“I find it hard to imagine that a board of directors would ignore (a shareholders’ vote), but they may feel there are special circumstances,” Frank said Friday. “It doesn’t take away the right of the board to make the final decision, but we think this would be a significant influence.”
The House of Representatives is expected to vote Friday on a bill that would let shareholders cast non-binding votes on pay for top executives. There is no similar bill in the Senate so it’s unlikely that a “say on pay” bill will become law this session.
But there could be additional legislation in the future.
“If we try this out and there’s a widespread pattern of boards ignoring shareholder votes, then we’d probably change it,” Frank said.
Frank and supporters believe such advisory votes would force boards to think hard before approving huge pay packages for chief executive officers, such as the $210 million given to Robert Nardelli, former CEO at Home Depot. But opponents say the free market corrects such excesses and note that Nardelli is long gone and his replacement is paid less.
The bill also would give shareholders a vote on “golden parachutes” offered to top executives when a company is sold.
In a prepared statement, the White House Office of Management of Budget said, “The administration does not believe that Congress should mandate the process by which executive compensation is approved.”
Rep. Spencer Bacchus, R-Ala., the ranking Republican on the House Financial Services Committee, said the measure, if signed into law, could force more companies to go private and therefore limit a citizen’s ability to invest in American companies.
“Why would Congress, in its infinite wisdom, say whether you want to vote (on executive pay) or not, we’re going to make you take that vote?” Bachus told CNBC.