With compensation for corporate executives gaining status as a Presidential campaign issue, Sen. Barack Obama has come out with an endorsement of Say on Pay, the hot governance issue of the current proxy season that would allow shareholders to approve pay packages for the most senior executives.
In a speech on Friday, Obama singled out two companies, KB Home and Countrywide Financial, as examples of those that have provided excessive compensation packages. He asked Congress to pass legislation he has sponsored that would require corporations to have a nonbinding vote on executive pay.
The legislation would not, however, permit shareholders to veto a compensation package offered to an executive and would not place limits on pay, the AP notes.
“This isn’t just about expressing outrage,” Obama reportedly said in prepared remarks. “It’s about changing a system where bad behavior is rewarded so that we can hold CEOs accountable, and make sure they’re acting in a way that’s good for their company, good for our economy, and good for America, not just good for themselves.”
Say on Pay proposals have been submitted to nearly 80 companies at this year’s annual meetings, according to RiskMetrics. Such major business groups as the Business Roundtable and U.S. Chamber of Commerce oppose these kinds of measures; however, in a recent survey of technology-company CFOs conducted by BDO Seidman, 61 percent said they think shareholders should be able to vote on executive-compensation plans..
Verizon decided to adopt Say on Pay late last year, and Aflac — the first company to adopt the policy — agreed to move up its advisory vote on the issue to this year.
On Thursday Goldman Sachs chief executive Lloyd Blankfein made it clear he opposes the practice. Speaking at the investment bank’s annual meeting, he said shareholder votes on executive pay would constrain directors from exercising judgment and hurt the investment bank’s ability to attract the best employees, according to Reuters. He added that it would “create a feedback loop. It would create a cloud, a constraint, a limitation on decisions that have been at the heart of what a board has done.”