Standards & Guidance: US House committee passes bill giving shareholders a vote on pay


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		Standards & Guidance US House committee passes bill giving shareholders a vote on pay The House of Representatives’ Financial Services Committee has passed legislation that would require US public companies to give shareholders an advisory vote on their executive pay plans. The proposed law will now be considered by the full House. The bill, H.R. 1257, the "Shareholder Vote on Executive Compensation Act", was introduced by the Committee’s chairman, Barney Frank, and also proposes a separate advisory vote if a company gives directors a new, not yet disclosed, “golden parachute” while simultaneously negotiating to buy or sell a company. The legislation has the backing of the International Corporate Governance Network (ICGN). Mark Anson, chairman of the ICGN, recently wrote to Frank urging for its rapid approval and implementation. At a hearing last month to debate the bill, Richard Ferlauto, director of pension and benefit policy at the American Federation of State County and Municipal Employees, welcomed the proposed law. His trade union has been campaigning for advisory votes on pay by proposing resolutions for this at company meetings. Ferlauto said the introduction of a vote on pay was part of the modernisation of shareholder rights in the US and the UK experience showed it had improved engagement between companies and investors and slowed the growth of executive pay. However, John Castellani, president of the Business Roundtable, which represents the chief executives of leading US companies, emphasised the differences between the UK and US corporate governance and legal systems. He suggested that as US boards are far more independent of management than the UK there was less need for a shareholder vote on pay. He also suggested that after five years of corporate governance reform in the US, which had made boards more independent and more accountable to shareholders, now was not the time to make further changes. Links House of Representatives House Committee on Financial Services H.R. 1257, the "Shareholder Vote on Executive Compensation Act" International Corporate Governance Network ICGN Letter Richard Ferlauto Testimony American Federation of State County and Municipal Employees Business Roundtable John Castellani Testimony April, 2007
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US House committee passes bill giving shareholders a vote on pay

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