House Approves Bill to Protect Taxpayers, Shareholders by Curbing Irresponsible Executive Compensation

Press Release

House Approves Bill to Protect Taxpayers, Shareholders by Curbing Irresponsible Executive Compensation

Congressman Peters' Shareholder Empowerment Act Includes Similar "Say-on-Pay" Provision and Other Investor Protection; Financial Services Committee Will Consider Peters' Bill This Fall

The U.S. House of Representatives today approved legislation to protect American taxpayers and shareholders from the excessive and risky compensation practices at large financial firms that contributed to the recent collapse of financial markets. The Corporate and Financial Institution Compensation Fairness Act would help curb irresponsible executive compensation practices that encourage high risk investments that seek big returns in the short-term but jeopardize shareholder investments over the long-term. In June, Congressman Gary Peters (MI-9) introduced the Shareholder Empowerment Act which includes provisions similar to those approved today, as well as further measures to protect shareholders. Financial Services Committee Chairman Barney Frank has said that the committee will mark-up Mr. Peters' bill sometime after the House reconvenes in September.

"As an investment advisor for over 20 years, shareholder rights issues have always been very important to me," said Rep. Peters, who served as a vice-president with Merrill Lynch and UBS PaineWebber for 22 years. "Wall Street executives who pursued reckless investment strategies were a major contributing factor to the recent financial meltdown. Too often, compensation packages encouraged high-risk, short-term payoffs that are not good for investors' interests. There must be common sense policies in place that ensure we do not see another financial sector catastrophe like the one that continues to reverberate through our economy. Shareholders are a company's true owners and I am pleased that we will pursue broad shareholder protection by soon considering the Shareholder Empowerment Act."

The Corporate and Financial Institution Compensation Fairness Act puts an end to incentives that encourage executives at large financial firms to take excessive risks at the expense of their companies, employees and shareholders. It requires federal regulators to monitor inappropriate or risky compensation practices and compels large financial firms to disclose any compensation structures that include incentive-based elements. The bill also requires publicly-traded companies to allow shareholders to take non-binding votes during annual meetings on the top five executive compensation packages.

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