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April 14, 2008

Obama Presses for Say on Pay

Presidential candidate Barack Obama ratcheted up his support for Say on Pay and called on Congress to pass legislation he has co-sponsored that would give shareholders a non-binding vote on executive compensation.

The legislation would not permit shareholders to veto a compensation package offered to an executive, nor would it put caps on how much individual executives could make. "This isn't just about expressing outrage," Obama said last week in prepared remarks. "It is about changing a system where bad behavior is rewarded so that we can hold CEOs accountable, and make sure they're acting in a way that's good for their company, good for our economy, and good for America, not just good for themselves."

Fellow Democratic presidential hopeful Hillary Clinton also supports Say-on-Pay legislation. Shareholders have submitted nearly 80 Say-on-Pay proposals to companies so far during this year's annual meetings, according to RiskMetrics. Legislation to adopt it universally, similar to a law that has been passed in the United Kingdom, is generally opposed by business groups. The debate over such proxy proposals and potential litigation is beginning to get more fierce.

"It is about changing a system where bad behavior is rewarded so that we can hold CEOs accountable, and make sure they're acting in a way that's good for their company, good for our economy, and good for America, not just good for themselves." --Barack Obama

While likely Republican nominee, John McCain hasn't taken a stance on the Say-on-Pay legislation, he too has peppered some of his stump speeches with warnings about "corporate greed" and outsized executive compensation. McCain's senior policy adviser, Douglas Holtz-Eakin, recently told the Wall Street Journal's JoAnn Lublin that the Senator believes the private sector needs to take steps to "end the cozy relationships that surround these pay packages. McCain offered the idea of splitting the chairman and CEO job as one way to accomplish that.

Roughly five companies, including Aflac and Verizon, have adopted Say on Pay into their bylaws after shareholders passed proxy proposals calling for the non-binding resolution.