Last week, House Financial Services Chairman Barney Frank (D-MA) delayed markup of legislation creating a new Consumer Financial Protection Agency (CFPA). Prior to the announcement of the delay, House Republicans Jeb Hensarling (R-TX) and Ed Royce (R-CA) had threatened a “barrage of amendments” to slow down the bill’s progress.
With CFPA not moving until September, the next item on the financial regulation docket is reforming executive compensation practices, particularly a provision known as “say on pay,” which would ensure that shareholders receives a vote on their company’s executive pay practices. But Republicans on the committee want this markup to wait as well:
In a letter on Friday, Republicans on the committee sought to delay the markup and votes on the bill, arguing that there has not been a hearing on the issue since the bill was introduced…The letter, signed by every committee Republican except Rep. Ron Paul (Texas), notes that 20 percent of the committee’s members are new and should be given more time to review the legislation.
This is weak tea from the committee members, considering that Frank introduced the legislation eleven days before the markup, and the draft that Frank introduced is based on the administration’s approach to compensation reform, which was released more than six weeks ago. In fact, MarketWatch reported that “the provision giving shareholders a say on top executive compensation is substantially similar to a measure the House approved in 2007.” So there’s been ample time for members to figure out what’s going on.
As The New York Times editorial board noted today, “the bonus-driven risk culture is reasserting itself now” on Wall Street, and thus there is ample reason for “fast-tracking the issue” of reforming compensation. Indeed, the Wall Street Journal reported earlier this month that Wall Street firms are already boosting compensation packages back to pre-crisis levels. After raking in big profits last quarter, Goldman Sachs and Morgan Stanley have “allocated a big chunk” of their revenues for compensation.
Perverse risk-taking, spurred by the way in which Wall Street designed its pay packages, contributed to the economic mess that we’re in, yet we have Wall Street revving itself back up while financial regulation legislation of all kinds languishes in Congress. It’s undeniable that further reform is necessary to better align compensation packages with the long-term viability of a firm, but “say on pay” has been successful in keeping executive compensation in other countries from skyrocketing like it has in America, and in keeping executives more accountable to the shareholders they serve. With executives now receiving one-third of all the pay in America, some more accountability is sorely needed.
Republicans, though, seem more interested in obstructing anything that moves in Congress these days. “We have accommodated one delay already,” said Steve Adamske, Frank’s spokesman. “They don’t want to vote on executive compensation.”