March 2, 2007 — U.S. Rep. Barney Frank, chairman of the House Financial Services Committee, introduced legislation that would require public companies to let shareholders vote on the pay packages of their top officers.

The bill would provide for a vote on compensation awarded in the prior year to a company’s five most highly paid executives, a list that typically includes the chief executive officer and chief financial officer. Because the ballot would be nonbinding, managers wouldn’t actually lose any pay in the event investors opposed their compensation.

Frank, a Massachusetts Democrat, couldn’t get similar legislation passed last year, when his party was in the minority. This year, as the chairman of the committee, he has made executive pay one of his legislative priorities. A hearing on the topic is scheduled for next week.

“I do not understand those who argue that the people who make up our stock markets are collectively very wise, but at the same time are somehow incapable of rendering a coherent opinion of what they should pay those they employ to run the corporations that they own,” Frank said.

The earlier legislation, introduced by Frank in November 2005 as the “Protection Against Executive Compensation Abuse Act,” said companies would have to hold a shareholder vote to approve compensation plans. Yesterday’s bill, called the “Shareholder Vote on Executive Compensation Act” makes clear that the required ballot wouldn’t be binding and wouldn’t overrule board decisions.

This entry was posted on Tuesday, May 29th, 2007 at 8:18 am While Dave was in Money. Responses are currently closed, but you can trackback from your own site.