US Rep Frank: Say-on-pay would test directors

By Kevin Drawbaugh

WASHINGTON, March 19 (Reuters) - The chairman of a key U.S. congressional committee on market oversight said on Monday that giving shareholders a symbolic "say-on-pay" vote on executive compensation would test corporate boards of directors.

If directors choose to ignore the votes, then a push likely would follow to give shareholders more say on who serves on boards, said the chairman, Rep. Barney Frank, the chairman of the U.S. House of Representatives Financial Services Committee..

"The advisory vote is a kind of a test for the boards of directors," said Frank, a Massachusetts Democrat.

At a conference held by the Council of Institutional Investors, Frank said he expects his committee to take up his "say-on-pay" proposal on Wednesday.

Frank's bill would give shareholders the right to cast an annual, nonbinding advisory vote on a corporation's executive pay package as outlined in the proxy statement, a document distributed annually to investors by corporate management.

Powerful business interests oppose the bill, but with Democrats in control of the House and Senate, it stands a better chance now than it would have a few months ago.

If it becomes law, Frank said he will be watching how it plays out with shareholders and boards. If shareholders vote to oppose pay packages and if directors simply shrug off the votes, then more drastic reform could follow, he said.

If the bill passes in committee, it would have to go before the full House, the Senate and the president before becoming law.

"It's a step-by-step process," he said.

Under questioning from a conference participant, Frank said the next step would likely be a push in Congress to support the idea of giving shareholders the right to insert their own nominees for board seats into annual corporate proxy ballots -- a long-held goal of investor rights advocates.