WASHINGTON (Reuters) - U.S. senators said Wednesday it was time to make corporate boards more accountable and give shareholders a say on executive pay after the collapse or government bailouts of big financial companies.
The Obama administration and senior Democrats are pushing to reform how companies are governed and executives are compensated as part of a broader package to overhaul the country’s financial regulation.
The Obama administration wants to give all shareholders an advisory vote on executive pay. The House of Representatives is due to vote on the so-called say-on-pay measure on Friday.
At a Senate Banking subcommittee hearing Wednesday on corporate governance, at least one conservative Republican said U.S. corporate boards ought to be more accountable.
“The board must be more involved and be a check on management,” Republican Jim Bunning said.
Currently, the U.S. securities regulator does not have the power to impose such rules. Mary Schapiro, chairman of the Securities and Exchange Commission, has said she supports say-on-pay for all publicly-traded companies.
The Senate panel examined ways to restore confidence in companies by improving how they are governed. It also looked at a bill introduced by Democrat Charles Schumer of New York, who wants to give shareholders more rights.
“There are far too many cases recently where boards of directors, not just regulators, were asleep at the wheel, or even complicit in practices that caused great harm to our economy,” Schumer said at the hearing.
Schumer’s bill would give shareholders more influence over executive pay, ban so-called staggered boards that prevent all corporate board seats from being voted on at the same time.
It would require board directors receive at least 50 percent of the vote in uncontested elections to remain on a board and would give shareholders an easier and cheaper way to nominate board directors.
Some Democratic lawmakers have supported giving shareholders an easier way to influence the composition of the board — an issue also known as proxy access and vehemently opposed by the business community.
Companies contend that giving shareholders proxy access would give special interest groups too much say on the board and undermine management decisions.
Shareholder activists such as the Council of Institutional Investors say it is their right to nominate board directors and on Wednesday urged Congress to affirm the SEC’s authority to adopt rules requiring companies to do so.
“To ensure that owners of U.S. companies face no needless delays over the effective date of this critical reform, the Council recommends congressional affirmation of the SEC’s authority,” the council’s executive director Ann Yerger told the hearing.
After the Senate returns from its August recess, a comprehensive financial regulation reform bill that includes corporate governance measures will be introduced in the chamber, subcommittee chairman Jack Reed, a Democrat, told reporters after the hearing.
Some Republicans voiced skepticism over government involvement in corporate affairs. Bob Corker, a Tennessee Republican, said many factors led to the financial crisis. “I hope that we don’t create a similar problem by over-legislating” how the corporate world works, he said.
Reporting by Rachelle Younglai; Editing Bernard Orr