The U.S. House of Representatives approved a bill to give shareholders the right to cast nonbinding votes on the pay of top company executives, handing investor advocates a win over the business community and defying the Bush administration.
By a 269-134 vote, the House passed the "say on pay" bill drafted by Massachusetts Democrat Barney Frank amid soaring pay for chief executives and rising worry about U.S. income inequality.
The measure would require corporations to hold the symbolic shareholder votes on pay each year, but they could ignore the outcomes. The measure is meant to make boards of directors think twice before giving massive pay packages to managers.
Leading business organizations opposed the "say on pay" measure as a government intrusion on the private sector and a potential source of lawsuits.
The White House opposes the bill. No companion measure has been introduced in the Senate, although some senators are keenly interested in the issue.
Right now, executive pay is set by directors nominated by managers and approved by shareholders. Critics contend this arrangement gives CEOs too much say on their own pay.
CEOs respond that giving shareholders a vote on pay -- even just a symbolic one -- would be costly and distracting and would inject outside politics into business decisions.
In 2003, the average U.S. CEO got about 500 times as much pay as the average worker, up from a multiple of 140 as recently as 1991, one academic study has shown.
"Say on pay" votes are common in Britain and Australia, but are controversial in America, where corporate CEOs typically wield more power and enjoy higher pay.