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House committee approves bill to regulate executive compensation

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] The US House Committee on Financial Services on Tuesday approved the Corporate and Financial Institution Compensation Fairness Act, which would restrict the way in which executives for publicly-traded companies can be compensated. Committee members say the bill would discourage executive compensation packages that emphasize short-term gains over long-term stability, which they say helped to cause the country's recent financial collapse. The bill includes a so-called "say-on-pay" provision that would allow shareholders an advisory vote on compensation. It would also require the disclosure of packages that include performance-based incentives and allow regulators to prohibit certain packages that are considered particularly "high risk." It does not provide a monetary cap on compensation. The entire House of Representatives is expected to discuss the bill on Friday. The US has already imposed more stringent rules on compensation for executives of companies that received financial assistance from the government following the collapse. In April, the House approved a bill that allows the Treasury Department to ban certain types of compensation at companies which receive federal bailout money from the Troubled Asset Relief Program (TARP). Earlier that month, it passed legislation that would tax bonuses given to employees of companies that received money from government stimulus programs at 90 percent. In February, President Barack Obama placed a $500,000 cap on executive compensation for companies receiving "exceptional assistance" from the federal government.

Full post as published by JURIST - The Paper Chase on July 29, 2009 (boomark / email).