House Moves to Limit Executive Compensation, Opponents Charge “Political Meddling”

Posted on August 5, 2009. Filed under: Uncategorized |

On its way out of town, the House passed the so-called Say-on-Pay bill to restrict bonuses paid to executives of firms that benefited from taxpayer bailouts.
Opponents of the measure said it was an unprecedented infusion of politics into the business world and could cost jobs.
“This bill is an invitation for political meddling at its worst in the private confines of companies that are trying to work hard to create jobs,” complained Rep. Peter J. Roskam (R-Ill.).
The Credit Union National Association and the National Association of Federal Credit Unions were among the business interests that joined in opposing the package. They argued that federal regulators already have power to restrict the size of executive compensation packages.
“Credit unions are being swept up by the wave of trying to punish the bad actors, and we are trying to limit that to the extent possible,” said CUNA Vice President for Legislative Affairs Ryan Donovan. “The Nation Credit Union Administration already has many regulations that restrict packages of this kind,” he added.
Also opposed: The National Association of Manufacturers, the U.S. Chamber of Commerce and the Business Roundtable.
Responding to anger over seven figure executive bonuses paid to companies receiving bailout funds, the House voted largely along party lines, 237-185, to give shareholders a greater say in determining compensation packages and to insure committees that help determine compensation levels have no ties to the companies or executives.
But the bill goes farther by telling companies they cannot offer incentives to employees who make investment decisions that are potentially lucrative, but also have the potential to harm the economy or the financial well-being of the company.
While the White House said the bill “would use the power of public opinion to dissuade outlandish salaries,” it also said rules should not stand in the way of profitable investment decisions.
“I think the president has and continues to believe that we the American people don’t begrudge…people making money for what they do, as long as…we’re not basically incentivizing wild risk taking that somebody else picks up the tab for. I think that’s what the president wants to make sure changes,” said White House Press Secretary Robert Gibbs.
The House action came shortly after a report from the New York state attorney general’s office that said nine banks that were the recipients of bailout funds gave bonuses to executives of $1 million or more.
The report said, for example, that Citigroup received $45 billion in federal money and rewarded 738 employees with bonuses of $1 million or more last year. Insurance giant American International Group Inc. gave similar bonus after the government’s $182 billion bailout.
Republican members of the House Financial Services Committee charged in a letter before the vote that the bill had not been subject to adequate review by House members. “It does these members a disservice to ask them to consider this legislation without the benefit of a hearing and an opportunity to understand what they are voting on,” the letter said.
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