House panel advances executive comp rules

A House panel on Monday approved legislation to impose new rules on executive compensation, setting the stage for a floor vote at the end of the week.

In a party-line 40-28 vote, the House Financial Services Committee approved the bill, which stops short of actually setting limits on executive pay but would allow federal regulators to put limits on compensation packages at financial firms deemed to have taken inappropriate risks. It also would offer shareholders an annual vote on executive compensation.

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President Barack Obama had asked Congress to approve similar legislation, and the committee-approved bill is similar to his proposals. Business groups have opposed efforts to give shareholders an annual vote on pay, and Republicans offered several amendments to change the bill, including a substitute amendment.

The committee’s ranking Republican, Rep. Spencer Bachus (Ala.), however, noted the difficulty his party faced on the issue amid public anger over huge bonuses awarded at firms such as AIG that have been bailed out by taxpayers.

“I shared with the chairman that doing something about executive compensation would be very popular with the American people,” Bachus said. “Opposing this puts our members in a very difficult position.”

Financial Services Chairman Barney Frank (D-Mass.) used Bachus’s words against him, saying that in the private exchange, Bachus indicated Republicans did not want to hold a hearing on his bill. Bachus insisted he was acknowledging the political peril to his party’s arguments, and not resisting a hearing.

Frank said his amendment reduced the scope of the compensation rules by giving the Securities and Exchange Commission the authority to exempt smaller firms from the rules.