Shareholders should have more power to bring lawsuits against companies for paying excessive compensation to executives, the chairman of the House subcommittee that has jurisdiction over securities matters said.
We probably have to re-examine the capacity of shareholders to bring lawsuits, said Rep. Paul Kanjorski, D-Pa., who is chairman of the House Financial Service Committees Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises.
It doesnt sound good. Nobody likes litigation, but in reality, that does get attention of boards and managers, he said in a talk in Washington on Tuesday sponsored by the American Constitution Society for Law and Policy of Washington and the Institutional Educational Foundation of Cambridge, Mass.
Mr. Kanjorski also suggested that shareholders be given more say in the election of corporate directors. Replacing an entire board of directors is extremely difficult, he said. New methods need to be found to incorporate better democratic principles into corporations, Mr. Kanjorski said.
He also called for examining new ways of handling debates over compensation at shareholder meetings and within boards of directors, and said a requirement that public corporations respond to questions from shareholders should be considered.
However, Mr. Kanjorski made it clear that he thinks Congress should be cautious when considering ways to rein in executive compensation.
Its not easily handled, he said.
We should be very careful in determining whether or not the Congress or some other public institution should establish the rules of compensation in our society, Mr. Kanjorski said.