Sharehold Vote on Executive Compensation Act

Floor Speech

SHAREHOLDER VOTE ON EXECUTIVE COMPENSATION ACT

* Ms. SCHAKOWSKY. Mr. Chairman, I rise today in strong support of H.R. 1257, the Shareholder Vote on Executive Compensation Act, which ensures that shareholders have a say in corporate executive compensation plans and golden parachute packages for executives who are negotiating the purchase or sale of the company.

* For too long, executive compensation has been determined behind closed boardroom doors. The results have been that executives' pay has skyrocketed to the point of absurdity.

* In 1991, the average large-company CEO received roughly 140 times the pay of an average worker. In 2003, the ratio was up to 500 to 1. It takes CEOs of the Nation's top companies the first two hours of the first workday of the new year to make $10,712. It takes a minimum wage worker 40 hours a week, 52 weeks a year to make the same. According to a report by Americans United for Change, those CEOs make $5,279 an hour, $10,982,000 a year, or 1,025 times more than their minimum wage employees.

* These numbers are even more stunning when one considers that those salaries are not based on performance. As hearings held by Chairman Frank have shown, even executives of companies that lose money, restate earnings, and face extensive regulatory scrutiny have received substantial compensation packages.

* The Shareholder Vote on Executive Compensation Act would help hold board members accountable when setting executive pay by allowing shareholders to vote on whether they approve of the compensation packages or not. It would also give shareholders the right to vote on golden parachute packages that executives may negotiate for themselves when arranging the purchase or sale of the company.

* Although these votes are non-binding, shareholders' voices will be heard. Executives and boards of directors will have to give weight to the shareholders opinions when deciding on what the gold-plated packages of executives will look like. And, it will let executives know they are being watched when negotiating the selling price of a company while simultaneously negotiating an additional personal exit package.

* A similar shareholder vote has been in practice in the United Kingdom since 2003 and is now used in Australia as well. The policy is credited with improving management/shareholder dialogue on executive compensation matters and increasing the use of long-term performance targets in incentive compensation. It was recently adopted voluntarily by Aflac, and according to Institutional Shareholder Services, is currently pending before 52 companies. I urge my colleagues to support H.R. 1257 and make it the norm for all U.S. companies.

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