Matt Stoller, policy adviser to Representative Alan Grayson (D-FL-8), who is great on just about everything except the Middle East and Cuba — which I hope to nudge him on a bit one of these days — just sent me this request:
Next week, the Financial Services Committee is going to be marking up a bill on executive compensation, the so-called ‘Say on Pay’ bill. Among other things, this bill mandates a nonbinding shareholder vote on executive compensation. Now, the vote is nonbinding, so the board could theoretically just ignore a shareholder ‘no’ vote.
Let’s say that the legislation were changed so that the shareholder vote were binding. What would happen if shareholders vote ‘no’? Would the executives then be paid nothing? That seems unreasonable and unworkable.
How could this be structured so that the shareholder vote is binding, but there’s some process to determine executive pay if management is voted down?
I am posting this for public comment here. Congressman Grayson will review the serious comments made.
I am also going to ask Leo Hindery, a CEO who has long been talking about the need to get executive compensation under control in this country, to consider posting a comment as well.
HIndery happens to be speaking along with Economic Strategy Institute President Clyde Prestowitz, Manufacturing and Technology News publisher Richard McCormack, and Alliance for American Manufacturing Executive Director Scott Paul at a New America Foundation forum titled “Manufacturing a Better Future for America” on Tuesday, 28 July, 12:15 – 1:45 pm EST. The event will stream live here at The Washington Note.
My own view is that controlling or constraining executive compensation requires a delicate fix — and I’m not sure one exists. I think that creating accountable boards and accountable committee structures that do have sensitivity to stockholders is healthy — but I agree with Stoller that binary votes by shareholders on executive compensation could produce unworkable logjams that produce outcomes more akin to command economies than market economies.
I look forward to reading your comments.
— Steve Clemons