WASHINGTON The U.S. House of Representatives today approved a bill that would require publicly owned restaurant and other companies to submit executive pay packages to non-binding votes of shareholders.
The so-called say-on-pay law, which passed by a 269-134 House vote, would require that shareholders’ yeas and nays on the compensation of “principal executive officers” be solicited via proxy materials distributed for annual meetings taking place after Jan. 1, 2009.
Under the measure authored by Massachusetts Democrat Barney Frank, such shareholder votes would not supersede corporate boards’ pay decisions but would express the sentiments of stockholders.
The Frank bill was drafted with the intention of giving shareholders more influence on executives' compensation levels. Soaring pay packages have drawn increased scrutiny in recent years, with stakeholders objecting to what some board of directors have agreed to give top members of manament. Activist investor Richard Breeden, for instance, has cited the compensation policies of Applebee’s International as one of the reasons for his effort to secure four seats on the casual-dining company’s board through his Breeden Capital Management LLC investment concern. The media has recently focused on the $13,4 million that McDonald’s Corp. chief executive Jim Skinner collected in 2006 compensation. According to proxy statements, David Novak, CEO of Taco Bell parent Yum! Brands Inc., collected $9.1 million, and Kerrii Anderson, CEO of Wendy’s International Inc., pocketed $6.7 million.
There is not yet a companion “say on pay” bill in the Senate, but Illinois senator and Democratic presidential candidate Barack Obama said he would introduce the parallel measure. In addition, Sen. John Kerry, D-Mass., has been quoted as saying there is a need for more “democratization ... so that shareholders are better leveraged and represented.”
Observers say it is a virtual certainty that President Bush will veto the bill in its current form.