House approves 'say on pay' for shareholders

By Kevin Drawbaugh

WASHINGTON (Reuters) - The U.S. House of Representatives approved a bill on Friday to give shareholders the right to cast nonbinding votes on the pay of top company executives, handing investor advocates a victory and defying the Bush administration.

By a 269 to 134 vote, the House passed the "say on pay" bill drafted by Massachusetts Democrat Barney Frank, chairman of the Financial Services Committee, at a time of soaring pay for chief executives and rising worries about U.S. income inequality.

The measure would require corporations to hold symbolic shareholder votes on pay each year, although they could ignore the outcome. The measure is meant to make boards of directors think twice before giving massive pay packages to managers.

Illinois Democratic Sen. Barack Obama, a 2008 presidential hopeful, said after the vote that he would offer a companion bill in the Senate to give "shareholders the power to debate and fight back against exorbitant executive compensation."

Leading business groups and most Republicans on Capitol Hill have opposed the concept of "say on pay" as a government intrusion on business and a potential source of lawsuits.

The White House has said it opposes the Frank bill, although President George W. Bush has criticized excessive CEO pay and urged that pay be tied more closely to performance.

Frank said, "The president himself has acknowledged that compensation has gotten out of hand."

But he said that Bush and some of his supporters seem to view excessive CEO pay, like global warming and rising income inequality, "as facts of nature that were neither caused by, nor can be corrected by human action. We disagree with that."