What: All Issues Requiring publicly traded companies to allow shareholders to cast non-binding votes on compensation packages for top executives beginning in 2009 (H.R. 1257)/Rep. Scott Garrett (R-N.J.) amendment to require shareholder votes on executive compensation packages only when pay exceeds the industry average by 10 percent (2007 house Roll Call 237)
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Requiring publicly traded companies to allow shareholders to cast non-binding votes on compensation packages for top executives beginning in 2009 (H.R. 1257)/Rep. Scott Garrett (R-N.J.) amendment to require shareholder votes on executive compensation packages only when pay exceeds the industry average by 10 percent
house Roll Call 237     Apr 20, 2007
Progressive Position:
Nay
Progressive Result:
Win
Qualifies as polarizing?
Yes
Is this vote crucial?
No

This vote was on an amendment to a bill requiring publicly traded companies to allow shareholders a say in the compensation packages of top executives. Proposed by Rep. Scott Garrett (R-N.J.), the amendment would have limited the scope of the underlying bill to instances where executive pay exceeded the industry average by 10 percent.

The companies within the same industry to which the executives' pay would be compared would also have to have a comparable total market capitalization.

The legislation Garrett was seeking to amend would require that all publicly traded corporations conduct annual nonbinding advisory votes on the compensation of their executives beginning in 2009. The impetus for the bill was a growing concern among lawmakers as well as many economists that the widening discrepancy between pay for executives and working- and middle-class Americans was harmful for both the economy and social mobility.

Garrett said without his amendment the legislation was "excessive" and "interventionist." He said his proposal would simply install a trigger that would have to be met before companies would be required to allow shareholders a vote on executive compensation packages. Garrett's proposal would have tasked the Securities and Exchange Commission with deciding which companies meet the requirements laid out in the amendment.

"Essentially my amendment seeks to limit the required votes to instances where the disclosed excessive compensation in question grossly exceeds the norm and provides a quantitative guideline for what constitutes the norm and what constitutes gross excess," Garrett said. "If the underlying bill were to pass as it is currently drafted, we will be forcing literally thousands of public companies across this country to conduct shareholder votes on every single pay package for every single CEO of every single public company all the time."

Rep. David Scott (D-Ga.) rose to oppose the amendment on grounds that it would require a complex calculation by the SEC and would undermine the purpose of the legislation.

"One of the first and most fundamental reasons why we oppose this amendment is because it is cleverly designed to do one thing and one thing only, and that is basically to gut this bill because it is totally unenforceable," Scott said, adding, "we should not single out any companies say if it is 10 percent of this or that, even if you could define the rather complicated formula that you have. What we are saying is every stockholder, every company with shareholders publicly traded, should have that opportunity to weigh in and have a say on the compensation packages."

Democratic opposition to Garrett's amendment was unanimous, and 23 Republicans joined them in opposition. Thus, on a vote of 155 to 244, the House rejected an amendment would have limited the scope of a bill requiring publicly traded companies to allow shareholders a say in the compensation packages of top executives to instances where executive pay exceeded the industry average by 10 percent, and legislation allowing shareholders a nonbinding vote in the pay of top executives moved forward without such a limitation.

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