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March 15, 2007
WorldatWork: More Effective Ways to Influence Exec Pay than Shareholder Vote

U.S. Representative Barney Frank recently proposed a bill that would give shareholders a nonbinding vote on executive compensation at public companies, but WorldatWork, an association of human resource professionals, says the legislation is unneeded.

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During a hearing held by the U.S. House of Representatives Committee on Financial Services about "The Shareholder Vote on Executive Compensation Act," WorldatWork staff submitted a statement on behalf of the association.

The association's statement made three primary points: (1) there are already a number of opportunities for shareholder input to companies and adding a "non-binding" vote on compensation doesn't add anything, (2) compensation packages are designed with a multitude of complex internal and external factors that are best thought through by professionals, independent company boards of directors, and independent consultants, and (3) the 2006-enacted Securities and Exchange Commission (SEC) disclosure requirements are only being implemented now and should be given a chance to prove they are inadequate before enacting more disclosure and regulatory requirements.

"The legislation proposed by Congressman Frank envisions all companies holding a non-binding shareholder vote on the compensation plan of executives," says Don Lindner, executive compensation practice leader for WorldatWork. "Although this could open up an additional channel of communication between shareholders and directors, there already are more effective ways for shareholders to influence executive pay such as the new SEC disclosure rules and shareholders' right to elect directors."

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