This was a vote on an amendment offered by Rep. Garrett (R-NJ), which would have made a number of changes in H.R. 3269. That bill gave federal banking regulatory agencies the authority to prohibit certain pay structures and arrangements for executives and individuals, as well as to revise specific bonus incentive arrangements. H.R. 3269 also required all publicly traded companies to hold an annual, non-binding, shareholder vote on the pay and bonuses for executives. It had been developed partly in response to the great outcry during this period of economic decline about the large bonuses that executives were receiving at banks and other financial institutions that had recently received federal “bail outs” in order to remain in business.

The Garrett Amendment would have deleted the section of the pending bill that gave federal banking regulatory agencies the authority to prohibit certain pay structures and arrangements for executives and individuals as well as to revise specific bonus incentive arrangements. Garret said that the reason for deleting the section was that it “would allow government bureaucrats rather than shareholders” to set pay structures.

His amendment also would have changed the shareholder vote from an annual process to once every three years, and would have permitted the vote to be discontinued if two-thirds of the shareholders wanted to opt out. Garret claimed that the reason for this change was to overcome the concern that “Wall Street focuses too much on the short term--on the year, on the 6 months, on the three-quarters or on the end of the quarter.” He said that the reason for giving shareholders the right to opt out of the periodic pay level vote was that “if we are going to trust the shareholders to be making these decisions, should we not also trust them to make the decision as to whether or not to have such votes on executive compensation in the future?”

The amendment was supported by the Center on Executive Compensation, which warned that giving the government the authority to prohibit pay ”portends the federal regulation of compensation in other contexts." The Center also claimed: "(A) mandatory (shareholder) vote on pay seeks to substitute the judgment of the shareholders for the informed judgment of the Board and will open the door to more shareholder votes on other issues". The U.S. Chamber of Commerce also supported the amendment, taking the position that H.R. 3269 “would represent a tremendous intrusion into affairs of business that have always been left to private actors.”

Rep. Frank (D-MA), the chairman of the Financial Services committee that developed H. R. 3269, opposed the amendment. He argued that the Republicans who were supporting it had predicted for 2 1/2 years “that free-market forces are already at work to correct pay excesses.” He then said “apparently . . . there have been no pay excesses in 2 1/2 years. We've all been hallucinating. They were wrong then, and (they’re) wrong now.”

The amendment was defeated by a vote of 179-244. One hundred and sixty-nine Republican and ten Democrats voted “aye”. Two hundred and forty-one Democrats and three Republicans voted “nay”. As a result, no changes were made in pending legislation that imposed new restrictions on the manner in which the level of executive pay and bonuses was determined.