‘Two-hundred Million to Run a Corporation?’
WASHINGTON, Nov. 10-Rep. Barney Frank and Massachusetts Secretary of the Commonwealth William Galvin introduced legislation Thursday that they said would help control skyrocketing executive salaries and increase accountability at public companies.
“Corporations brag about cost controls, but they also brag about how much they pay their executives,” Frank said at a press conference introducing the Protection Against Executive Compensation Abuse Act. “I have not discovered a race of super-beings. who deserve this astronomical compensation.”
The payment of corporate leaders has become an issue of increasing concern in the past several years as many top executives received annual compensation packages exceeding $100 million, even, in some cases, after their companies lost money or entered bankruptcy. From 2003 to 2004, the median total compensation received by CEOs of the top U.S. companies increased 30 percent, according to data from the Corporate Library.
Frank’s bill focuses on increasing the transparency of public companies’ financial statements and requiring full disclosure of executive compensation plans and policies, changes that Frank contended would allow investors to make better-informed decisions about purchasing stocks and casting shareholder votes.
“If this bill becomes law, I think it would accelerate the trend towards bringing salaries under control,” Frank said.
The bill also addresses CEOs who negotiate mergers or sales that may not be in the best interest of their company but results in millions of dollars of additional payment for the company’s executives.
In such cases, companies would be required to hold a shareholder vote on any additional compensation that the CEO would receive as a result of the sale.
Galvin noted that under current law, merger and acquisition information is often very hard to uncover, specifically citing his own attempts to learn the details of Procter and Gamble’s purchase of Boston-based Gillette. That deal earned Gillette chief James Kilts a reported $153 million and was expected to result in nearly 6,000 lost jobs.
Because many executive compensation plans include performance bonuses, the proposed legislation also contains measures to ensure that company chiefs are not hitting their goals through use of what Frank called “creative accounting.”
Corporations would be required to take back incentive compensation if it is discovered that financial statements were manipulated or changed to indicate that performance goals had been reached.
Beyond the legal implications, Frank said, it is simply not acceptable for corporate executives to receive such large salaries.
“I am offended by this morally,” Frank said. “Two-hundred million to run a corporation? Just for doing their job?”
Galvin expressed optimism that the bill, if passed, would have positive ramifications for shareholders and average workers.
“How do we protect the financial future of Americans?” Galvin asked. “This bill is an important part of doing that.”
