Last week, the Chamber of Commerce announced that it will “vigorously oppose” a new consumer protection agency proposed as part of the Obama administration’s regulatory reform package. But that’s evidently not the only way in which the Chamber is out to influence the debate over the changes facing Wall Street.
Yesterday, the Chamber laid out its opposition to a change — backed by the administration and House Financial Services Chairman Barney Frank (D-MA) — that would allow shareholders to vote on their company’s executive compensation practices, so called “say on pay”:
Opponents of an effort to give shareholders greater rights are centering their attacks on organized labor, arguing that unions are pushing such proposals to bolster their ranks and boost their declining pension funds.
“Big labor unions are trying to achieve at the board table what they cannot achieve at the negotiating table, under the guise of shareholder protection,” said David Hirchsmann, president of the Chamber’s Center for Capital Markets Competitiveness.
So the Chamber opposes the Employee Free Choice Act because it wants to “save the secret ballot,” while also opposing “say on pay,” which would guarantee that shareholders can hold a non-binding vote on their company’s executive pay packages. Isn’t it convenient that the Chamber only thinks voting is important when Big Business can set the rules?
But “say on pay” is really about injecting some sanity back into corporate governance. As Treasury Secretary Tim Geithner said, “[say on pay] has already become the norm for several of our major trading partners.” In two of those countries — Great Britain and Australia — CEO pay “grew 2.4 percent and 25.3 percent, respectively, from 2002 through 2006, while pay in the United States soared 59.9 percent in the same period.”
Some companies in the U.S., including Aflac Co., voluntarily undertake such votes already. “We want people to look at us and say, ‘Here’s a company that will even let you vote!’” said Aflac CEO Daniel Amos. “It’s symbolic, but it’s an important symbol.”
And that’s just the thing: the vote is non-binding, leading some to say that it doesn’t go far enough toward reining in Wall Street excess. As Dean Baker explained:
The current rules allow management insiders to make out like bandits at the expense of shareholders and other stakeholders. This is why clowns get paid tens of millions to run their companies into the ground in the US…Obama’s proposals do not go nearly far enough in taking back power from the insiders. We should have binding shareholder votes on compensation in which unreturned proxies don’t count.
So in the end, “say on pay” is simply an attempt to get some sense of balance back into corporate governance, and to start holding executives accountable to someone other than themselves.