Senators Charles E. Schumer, D-N.Y., and Maria Cantwell, D.-Wash., today introduced legislation called the Shareholder Bill of Rights that includes provisions to increase accountability and oversight at publicly traded corporations, including say on pay for shareholders.
During this recession, the leadership at some of the nations most renowned companies took too many risks and too much in salary, while their shareholders had too little say, Mr. Schumer said today at a Washington news conference.
This legislation will give stockholders the ability to apply the emergency brakes the next time the company management appears to be heading off a cliff. When these companies go bust, it doesnt just deplete the retirement savings of American workers, it can have disastrous ripple effects on the entire economy, he said.
Accountability is key to restoring investor confidence, Ms. Cantwell said.
Financial institutions and corporate boards of directors took excessive risks with shareholders savings, and lost, but these same executives are now walking away with lavish compensation packages, she said.
This legislation will give those shareholders and pension-fund investors a voice in the corporate boardroom, so they can make sure the directors for the corporations they own are working for shareholders best long-term interests, not just executives short-term gain.
The bill includes a say-on-pay provision to give shareholders an advisory vote on executive compensation packages. It also instructs the Securities and Exchange Commission to issue rules allowing shareholders to have access to the proxy form if they want to nominate directors to the board.
It would also require that directors receive at least 50% of the votes in uncontested elections in order to remain on the board and that they face re-election annually.
The bill is supported by nearly 20 major pension funds, labor unions and consumer groups, Mr. Schumers office reported.
However, the Washington-based Center on Executive Compensation, an organization of senior human resources executives at 250 of the nation's largest corporations, took issue with the legislation.
"The center disagrees that an annual vote on pay, rather than an informed dialogue, is the best way to improve pay practices in the U.S.," Timothy Bartl, senior vice president and general counsel, said in a statement issued today.
By mandating a one-size-fits-all approach to compensation and governance, the bill would have serious unintended consequences for performance-based compensation and sound corporate government practices, he said. The center believes that improvements in disclosure would provide shareholders with a clearer view between pay and performance.
Sue Asci is a reporter at InvestmentNews, a sister publication of Pensions & Investments