House panel to act on executive pay curbs bill

By Kevin Drawbaugh

WASHINGTON (Reuters) - A U.S. congressional panel plans to take action on Thursday on legislation meant to curb executive compensation, including a ban on pay structures at financial institutions that encourage "inappropriate risks."

Draft legislation circulating in the House of Representatives on Friday would require nonbinding votes on executive compensation plans by shareholders, according to a document released by the House Financial Services Committee.

The non-binding votes provision resembles so-called "say on pay" legislation that was approved by the House in 2007. Investor advocates have long favored this approach to giving shareholders more voice in setting corporate manager pay.

Coming amid a broad push for financial regulation reform by the Obama administration and congressional Democrats, the draft House legislation also calls for shareholder votes and more disclosure on special pay arrangements for managers in mergers, acquisitions and other changes of corporate control.

It would also require that the compensation committees of all publicly traded companies be made up of independent directors, and that compensation consultants hired by such committees satisfy certain independence criteria.

In addition, it calls for a ban on pay structures at financial institutions that encourage "inappropriate risks" that "could have serious adverse effects on economic conditions or financial stability; or could threaten the safety and soundness of the covered financial institution."

A spokesman for the House panel said it planned to bring up the bill for drafting and a likely vote on Thursday. Committee approval would send it to the House floor for a vote.

The executive pay bill is part of a massive reform plan being pursued amid the worst financial crisis in generations and with the economy in its 19th month of recession.

(Reporting by Kevin Drawbaugh, Editing by Chizu Nomiyama)