'Say on Pay' Legislation Gains Momentum

In the wake of this unprecedented financial crisis, there has been a public outcry for greater accountability for executive compensation. This year, shareholders from over 100 companies requested the right to vote on compensation paid to the company’s executives. These votes, known as “say on pay” votes, have gained further momentum as the year has progressed. When the federal government passed its financial stimulus package earlier this year, it mandated that recipients of the troubled asset relief funds provide “say on pay” votes to shareholders. Since then, a number of bills have been introduced into Congress that would require “say on pay” votes for all public companies.

The leading “say on pay” proposal, the Corporate and Financial Institution Compensation Fairness Act of 2009 (HR 3269), was introduced by Rep. Barney Frank and passed by the House of Representatives in late July of this year. HR 3269 is based upon the Treasury Department’s “say on pay” proposal that was introduced earlier in July. The Treasury Department’s proposal largely mirrors “say on pay” rules that were passed in the United Kingdom in 2002. The Senate is expected to consider HR 3269 this month and some form of “say on pay” legislation is expected to be passed this fall.