- The Washington Times - Sunday, August 2, 2009


The House passed “say-on-pay” legislation on Friday that imposes a non-binding annual vote on executive pay packages by shareholders of publicly traded companies. Until Congress learns how to do its own job, lawmakers should not try to tell companies how to run their businesses.

An even bigger concern is language from Financial Services Committee Chairman Barney Frank subjecting investment advisers, broker-dealers, and banks to government approval of executive pay packages. Proponents argue that such limits are needed to stymie risky behavior by top executives, but the bill fails to define what level of risk is too high, leaving that determination open to the vagaries of government bureaucrats.

The say-on-pay vote isn’t needed and would only impose unnecessary burdens on the private sector. If pay practices are a concern, shareholders already can push out board members who back troubled executives or unearned pay. Large investors like pension funds will find the mandate unwieldy because their massive portfolios will force them to cast innumerable votes annually, which causes a significant drain on resources.

The United Brotherhood of Carpenters cast more than 200 so-called say-on-pay votes this year as mandated for institutions receiving Troubled Asset Relief Program bailouts. Citing the time and expense gobbled up for each vote, the union proposed holding them only every three years. Mr. Frank’s committee rejected that idea Tuesday when approving the bill, as did the entire House prior to passage.

The finance sector can be too driven by short-term gains to the detriment of long-term financial benefit, but this legislation provides no additional protections for shareholders. It merely plays a populist tune for cheap political points at a time when corporate big wigs are unpopular. If enacted, private companies and their investors will pay the price for Congress yet again sticking its nose where it should not.

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