Shareholder Vote on Executive Compensation Act

Mr. Chairman, I yield myself such time as I may consume.

This is a bill to further the workings of the capitalist system of the United States. It has one very specific provision. It says that the shareholders, the owners of public corporations, will be allowed to vote every year in an advisory capacity on the compensation paid to their employees who run the companies.

Now, Mr. Chairman, some might think this is unnecessary. In a better world, it would be. But there is not now any clear-cut, uniform, legal right for the shareholders to get such a vote. Some corporations allow it, some do not. Some boards of directors allow it, some do not. In a recent case, the SEC ordered AT&T to allow such a vote, but it was because of certain circumstances. There is no general principle that allows it.

We do have, thanks to the Securities and Exchange Commission under our former colleague from California, Mr. Cox, a provision that I am sure many considered to be an intrusion into the private affairs of corporations, because without regard to the wishes of the corporations, the SEC under Chairman Cox has unanimously adopted rules that require corporations to put in the annual proxy form a chart of compensation for the top officials and an explanation of the theory of the compensation by which they are there.

Understand that this is a decision by the SEC to require corporations to do what they would not otherwise have done, because it only applies to those who haven't done it.

We add one simple fact here. The SEC has said that it does not have the power to go further and compel corporations to allow the owners to vote. Our bill simply does that. Our bill simply says, you will have on your proxy form, printed anyway, what the compensation figures are. There is no debate about how they will be presented. We require, if this bill passes, corporations simply to add to that a box that says ``I approve/I disapprove,'' and you can check it as appropriate. And the sole expense to the corporation is the ink in printing ``approve'' or ``disapprove,'' and the tallying along with the other tallying. There is no additional paper, there is no additional anything else.

We have had a situation in which people, including the President of the United States, have acknowledged that in some cases CEO compensation has become excessive. I believe that that is clearly the case. A study done by Professor Lucian Bebchuk at Harvard, unrefuted by the defenders of the current corporate compensation system, notes that the amount of corporate profits going to the salaries for the top three employees, the compensation to the top three employees has about doubled to the point where a year or so ago it was nearly 10 percent.

We are talking about real money. We are talking about money that goes to these top executives that could be used for other purposes. For example, when Mr. Nardelli of Home Depot received a $210 million good- bye kiss that had been written into his contract, when he was fired and given a $210 million consolation prize, Home Depot was at the same time announcing that they were putting $350 million into improving the stores. Well, suppose Mr. Nardelli had been sent out into the cold, hard world with only $50 million for the rest of his life. $160 million more would have been available to add to that $350 million for the stores, considerably more than a third. In other words, that was a real number. If $350 million can fix up the stores significantly, another $50 million or $75 million could have increased that by up to 50 percent.

The President himself has acknowledged that the compensation has gotten out of hand. But from the standpoint of the President, excessive CEO compensation, increased inequality in our economy, which is a part of this, global warming, they all have certain common elements; the President and some of his supporters have reluctantly acknowledged the reality of those things, having denied them for some time, but they appear to regard them as facts of nature that were neither caused by nor can be corrected by human action. We disagree with that.

Now, people have suggested that the salaries are too high and Congress should limit them. We reject that. This bill as we have presented it does not intrude into the process of setting compensation.

Mr. Chairman, some of the amendments offered would do that. There are amendments that would alter the effect of this, depending on the kind and amount of compensation. I think those are erroneous. I think some of my friends on the other side have become, in their zeal to defend corporate compensation levels, de facto, in a bad situation. They would be more intrusive.

All we say is this: The shareholders own the companies, and we believe the shareholders should be allowed to vote.

Now, some people have said that is up to the board of directors, why are you singling out compensation for the CEO? And there is a good reason. You can make arguments about corporate governance one way or the other. We are not going beyond one point here. The relationship between the CEOs and the boards of directors is very different than most of the relationships the boards of directors have. The CEOs and the boards of directors select each other. There is a lack of an arm's length situation there that we think makes it appropriate to single it out and let the shareholders vote.

It is only an advisory vote, that is true, and you will hear the contradictory argument that we are both too intrusive and not sufficiently intrusive into the affairs of the corporations. But we have more confidence in the boards of directors than some of our colleagues. Not completely, or we wouldn't have this bill. But we do not think boards of directors will likely disregard an advisory opinion from the shareholders and, therefore, we think that is an important input that the board should have. They have their ultimate responsibility, and maybe they will find some special circumstance that says, we can't follow in this case. The shareholders own the company, and we are simply giving them this right.

The last point is, and we have heard people say, well, you are interfering with the affairs of the corporation. Corporations do not exist in nature; they are the creations of positive legislative action. No corporation anywhere has powers except those that are given to it by a government, and governments tell the corporations what powers they have, what immunities they have, and what rules they follow. The SEC just intruded very deeply into the affairs of corporations by requiring the posting of the compensation.

We say that under current rules, including some State laws, and it varies from State to State, the shareholders don't have enough rights. And all we do here is empower the shareholders to vote on the compensation of the people who work for them.

The last dogma I would deal with is, well, how can the shareholders know that? It is extraordinary to me, Mr. Chairman, to listen to people who ordinarily are quite respectful of the wisdom of the market. And what is the market? The market is the people who buy the shares. Those are the people who make up the market. And apparently this group of people who are the shareholders are in most respects quite wise. But when it comes to deciding how much to pay the people who work for them, they get stupid, and this is somehow beyond their capacity.

We disagree with that. We think this is a moderate and temperate approach to the issue of runaway compensation, excessive compensation, not in every case, and in every case it wouldn't be used negatively.

I should have said one other thing. No one has shown any correlation between these outsized compensation examples and any metric of success. Indeed, too often they are metrics of failure because they are payoffs to get people to leave quietly.

So we hope that this bill will be adopted and that shareholders who own the companies will have the right to express their opinion to the boards of directors on the level of compensation for the top employees of the company.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 5 minutes to the gentleman from Georgia (Mr. Scott), one of the most active members of our committee and a man with significant business experience.

Mr. Chairman, I will yield myself 1\1/2\ minutes.

I congratulate the gentleman on the high art of selective quotation, because he quoted from former Secretary Reich. He left out the thrust of the article which was, he was against doing this because instead he thought we could change the Tax Code. In fact, that article is mostly an attack on the tax cuts which the gentleman from Delaware supported.

Secretary Reich's article is essentially, and I will submit it for the Record under our general leave, I was waiting for the gentleman to quote those parts of Mr. Reich's article in which he calls for significant increases on taxation of upper-income people. I have to say to my friend, it is only a partial quotation.

I am on my time. I gave myself a minute.

I was frankly waiting, and I was disappointed, but that happens a lot in life, for the gentleman to get to the part of the article that he quoted selectively in which that article says what you really want to do is make the tax system more progressive. I suppose the gentleman didn't want to quote criticism of tax cuts that he voted for, but it did seem to me, if we are going to be quoting things, Mr. Reich said not that he was opposed to this as a bad idea, but that a much better way to do it would be to undo the tax cuts that the gentleman from Delaware supported at the upper brackets.

Mr. Chairman, I would ask to insert in the Record the article by Robert B. Reich.

[From The American Prospect, April, 2007]

Don't Count on Shareholders

(Robert B. Reich)

An acquaintance of mine sits on the board of a major

company that just agreed to pay its CEO close to $10 million

this year, including deferred compensation and stock options.

I asked him how he and his board colleagues could possibly

justify that kind of money. ``No choice,'' he said. ``That's

what our competition is paying. It's the going rate.'' As

Congress struggles to raise the minimum wage to $7.25 an

hour, the going rate of CEO pay is now $5,000 an hour.

Polls show most Americans think this is obscene. But how to

rein in CEO pay? A growing consensus believes the best way is

to give shareholders more voice. New Securities and Exchange

Commission rules require companies to inform shareholders in

greater detail what their companies are paying top

executives. In recent months, shareholder activists have

submitted proposals to 60 companies seeking input on CEO pay.

House Democrats are now working on legislation that would

give shareholders the right to have more say over pay.

But the growing consensus is wrong: Shareholders won't

constrain the growth of CEO pay, because most shareholders

don't care about it. The vast majority own their shares

through mutual funds and pension funds, and don't even know

which companies they're invested in at any given moment.

Their only concern is maximizing the return on their total

portfolios. They keep the pressure on fund managers to do

this by moving their savings from funds that underperform to

those that show better overall results.

Fund managers, for their part, don't care much about CEO

pay, either. They're looking for companies whose share prices

are rising, and they push firms to get their prices up by

shifting capital out of those whose prices are lagging into

those that show more promise.

Presumably, shareholders and fund managers would want to

constrain CEO pay if it hampered company performance, but it

hasn't. While CEO pay has soared over the last 25 years,

share prices have soared, too. Between 1980 and 2003, the

average value of America's 500 largest companies rose by a

factor of six, adjusted for inflation. What happened to

average CEO pay in those companies? It rose roughly sixfold.

Shareholders have no reason to complain. They don't--and they

won't.

Depending on shareholders to rein in CEO pay is like

relying on gamblers to rein in the owners of Las Vegas

casinos. Just look at Britain. Since 2003, changes in British

securities law have given investors there more say over what

British CEOs are paid. Nonetheless, executive pay in Britain

has continued to skyrocket, and now just about matches that

of American CEOs. Companies listed on the London Stock

Exchange have done sufficiently well that British investors

don't care what CEOs are paid.

The real scandal of CEO pay has almost nothing to do with

shareholders. It has to do

with what's happened to the pay of most other workers as CEO

pay has soared. Shareholder returns have kept up with CEO

pay, but median wages have not. In 1980, the CEO of a major

company took home about 40 times what the median worker

earned; by 1990, that CEO's pay was about 100 times the

median worker's; in 2006, it was close to 300 times what the

median worker earned. (Last year, Wal-Mart's Lee Scott Jr.

earned 900 times the pay of the average Wal-Mart worker.)

CEO pay is part of a much larger problem: the growing

portion of the nation's income that's going to a small number

of people at the top. The pay packages of many denizens of

Wall Street are even more outrageous than CEO pay--last year

reaching $40 million for top traders and more than a billion

dollars for top hedge-fund managers. The new stars of Wall

Street are private equity funds that are buying public

companies back from shareholders and raking in 20 percent to

25 percent annual returns for their private investors--mostly

wealthy individuals with yearly incomes already in the

stratosphere.

Not since the robber-baron era have income and wealth been

as concentrated as they are today. This doesn't threaten

shareholders; after all, most shares are held by the wealthy.

It threatens democracy, as the wealthy use their fortunes to

bankroll politicians who tilt public policies in the

direction of the wealthy--by, say, reducing their taxes and

cutting public services for everyone else. It also threatens

our economy, as more and more investment decisions are made

by fewer and fewer people, and as the middle class loses its

capacity to pay for the goods and services the economy

produces.

The answer is not to grant more rights to shareholders.

It's to enact a far more progressive income tax, including a

sharply higher marginal rate on yearly incomes above, say, a

measly million.

I would say to the gentleman, I am baffled by this. On the one hand, this is too intrusive, but the gentleman says a better way would be to require corporations to elect directors by a majority. That would be a far greater intrusion into all of the aspects of the corporation.

But I will say this, if the gentleman prefers and the Members on the other side prefer: that we instead pass legislation that requires all corporations to allow a majority election for directors in an effective way as an alternative to nominations. Maybe we will hold off on this bill and consider it. I await that bill.

The gentlemen on the other side are all full of other solutions, none of which have ever been put to paper.

Mr. Chairman, I yield 6 minutes to the gentleman from Missouri (Mr. Cleaver) a member of the committee and a great ethical expert.

Will the gentleman yield?

I am from Massachusetts, but I do want to report a theft, Mr. Chairman. Apparently someone has broken into our committee office and stolen a whole series of bills that the other side had to deal with all these other things, because I am hearing now about all these other things we should be doing and these other things that we should be addressing, and I haven't seen any of them.

So I want to say to people, unfortunately, all these wonderful ideas that you previously had, and I wouldn't suggest that you are only saying them now as an excuse to beat this bill, please send me copies, because somebody stole the ones you sent me.

I am still in Massachusetts.

And one is quite enough.

Mr. Chairman, I would take 10 seconds to say that the gentleman from California mischaracterized his own amendment. No amendment he offered would expand shareholder rights. He did offer an amendment that said if there is a preexisting right to vote for the majority, then this bill does not apply. But no amendment he offered would expand existing shareholder rights.

I yield to the gentleman from California.

What do you mean you wished to offer? I will take back my time.

I understand that, but let me just give myself 30 seconds.

Mr. Chairman, why didn't he file it as a separate bill? He had no interest in this that I could discover until we brought this bill up. The gentleman said he wanted to offer a nongermane amendment.

Well, you are allowed to introduce bills. Introduce a bill. We will have a hearing. If the gentleman, let me tell my colleagues right now, if they want to introduce legislation expanding the right of shareholders to vote for members of the boards of directors, I will guarantee them a hearing. But the bill has not yet been introduced.

Mr. Chairman, I yield 30 seconds to the gentleman from Georgia (Mr. Scott).

Mr. Chairman, I yield 4 minutes to the gentleman from New Jersey (Mr. Sires).

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I would just note in passing that I saw the letter from the Chamber of Commerce, and I was particularly struck that the Chamber of Commerce said we don't need this bill because Sarbanes-Oxley has been such a good law. Specifically, what they said was, Sarbanes-Oxley has yielded significantly stronger and more independent boards and compensation committees. So I think that the Chamber of Commerce's endorsement of the good results of Sarbanes-Oxley also ought to be made public here.

Mr. Chairman, I yield my remaining time to the gentleman from North Carolina (Mr. Miller), a relatively senior Member. Not particularly the one I had in mind, but a very able and useful Member.

Mr. Chairman, I would just say I also want to welcome this renewed faith that I have heard from my colleagues in the American corporate system. Recently corporate America and financial America has been lamenting how badly we regulate compared to England.

We have heard from the Paulson Committee, so-called after the Secretary of the Treasury, we have heard from the Chamber of Commerce, we have heard from the McKinsey report that we should be more like England. I am glad now to have this affirmation that even with Sarbanes-Oxley that the Chamber of Commerce praises so loudly, even with the Securities and Exchange Commission apparently not being the FSA, the American system

still works. That is a good counter to some of what we have heard lately.

Mr. Chairman, I move to strike the requisite number of words to first thank the gentleman from Alabama for his kind remarks about the way we have been working together in committee. I would just say that I have too recently been in the minority to be abusive. I hope that will last. I certainly intend it to. I am told, by the way, by our Parliamentarian, who, as the gentleman knows, was the Parliamentarian when the other side was in the majority, we have already had more rollcalls in committee in this year than we have had in the previous congressional session. While we have been moving a lot of bills and we have been able to do it expeditiously, I think we've aired a lot of issues, on this particular case, members of the minority made this suggestion, and it is a plausible one. It improves the bill. I realize that they still don't like it, but I appreciate this constructive spirit, and so I urge adoption of the amendment.

Mr. Chairman, I move to strike the requisite number of words.

The gentleman from Illinois has accurately described this, and I urge its support.

Mr. Chairman, I rise to offer amendment No. 4 and to make a unanimous consent request to modify it.

I appreciate the other side going into their non-objectionable mode, at least for the nonce.

I did this because I had an amendment that included several provisions, one of which was identical to the provisions the gentleman from Illinois just offered, and that having been adopted, it would be redundant to do it again. This is, again, I believe, a technical amendment. It simply tries to conform the language in the bill with regard to what it requires.

I think the best way to say it, Mr. Chairman, is this. There was disagreement on the substance of what we require. We did want to make it clear, however, that we weren't requiring any more than that, and any suggestion that we might have been creating procedural or other kinds of obstacles, we wanted to work together to avoid. This is in furtherance of that, so I ask that the amendment be adopted.

Mr. Chairman, will the gentlewoman yield?

I thank the gentlewoman. She is, as always, a staunch defender of her constituents, including those who were hurt by Enron.

I could not object to this in principle, and I did say this. We made an effort to make this bill minimally intrusive. I would expect that these votes would be promptly published. But the gentlewoman has a legitimate concern, and I would make this commitment to her: If this bill becomes law and we encounter any effort not fully and promptly to publish these, then I promise her an immediate hearing and action on her amendment.

So I think we will take this, I hope, as a chance to give people the message, if this bill becomes law, it should be complied with forthrightly and effectively; and if we encounter any efforts at any kind of obfuscation, then the gentlewoman, I promise her, will be back on the floor with our support.

Mr. Chairman, will the gentleman yield?

The gentleman should give my friends on the other side credit for consistency. As he knows, their definition of democracy has recently frequently included throwing votes away.

I will extend the gentleman a similar courtesy.

Mr. Chairman, I ask unanimous consent that the gentleman from Texas be permitted to proceed for 2 additional minutes.

Mr. Chairman, I move to strike the requisite number of words.

The gentleman from California mischaracterized my argument. I didn't say that it wasn't intrusive enough because it wasn't mandatory. I was responding to his earlier assertion which might have led people to think it was mandatory. I was simply correcting the characterization.

I would say this. If the gentleman wants to introduce a bill, and he complains a little bit, well, that he was only able to offer this amendment because only in this form is it germane to this bill; I know the gentleman is a relatively new Member, maybe he didn't understand that Members have the right to file any legislation they want.

Had the gentleman genuinely wanted to deal with this and broaden the right of shareholders with regard to elections of the boards of directors, that if I were here, I would have filed such a bill, I will tell him now, I will yield only if I can get unanimous consent to extend my time.

If Members tell me that, I will be glad to yield. No problem. I will be glad to yield in a minute just to say this: If the gentleman now decides, having considered this, that he wants to file such a bill, I will guarantee him a hearing. I will say this: We will find more opposition to it if we were to mandate that. That is one of the factors I will introduce.

I would say, until we had filed this bill, I had not seen any indication from the gentleman this is what he wants to do. If he wants to file a bill to give shareholders the right to vote by a majority for directors, and I think there has to be further change, then I would be happy to guarantee a hearing.

I will yield to him.

I am taking back my time.

I will explain why to the gentleman, because I think it's going to be hard enough to get even this through. We have had people who said this is way too much. I do not think the gentleman speaks for his party in being supportive of something that will be far more opposed by a broader segment. If, in fact, that would happen, I would be supportive, but I do not want to have the chance to sacrifice this.

I will say one other point. The argument is, why do you single this out? I believe there have been problems with boards of directors in general, although I will repeat again that the Chamber of Commerce, as was noted, thanks Sarbanes-Oxley for significantly improving the quality of boards of directors. I think our former chairman should be pleased to have this ringing endorsement of his handiwork from the Chamber of Commerce.

But there is still this problem, boards of directors are at their least independent in dealing with the CEO who may have selected them. I do think there is reason to single out the CEO-board relationship from other issues.

The other question I have is this and why I wouldn't vote for this amendment in any case, it says a majority vote, but here is the problem. In many corporations, there is no way to nominate someone to be on the board, other than by the board. There are many corporations that do not allow that.

If the gentleman wants to come in with a bill that says shareholders, a certain minimum number, not any one person, but if we could agree that a reasonable number of shareholders could designate alternative candidates, then we could do this. An election in which you require a majority to be elected is part of the democracy, but an alternative is also part of the democracy.

The gentleman has half of the democracy in here. He has a requirement of the majority vote, but no requirement that there be any competition. As we all know, the fact of competition could affect the final vote.

If the gentleman's newly found interest in this sustains itself, and he says it will, and he wants to file a bill that requires that there be access, proxy access to our nomination process and then a majority vote, he will have my support. Until then, though, I see no reason, in the hopes of that, to get rid of this bill.

I do want to respond to an earlier comment by the gentleman from New Jersey who said we could only do it for excessive compensation. He fundamentally misunderstands this bill and contradicts itself.

It is not the job of the Congress to say what it is or isn't excessive. We have individual opinions about excess. We are leaving it to the shareholders.

The gentleman said they should only have to vote if it is more than such and such above the average. What about if you are getting average pay for a subpar performance? What if the shareholders of a particular corporation say, this man doesn't deserve the average, this woman hasn't lived up to the average?

The notion that we should qualify the abilities of shareholders to vote on what to pay the owners of their own company, based on what we think is excessive, an empirical definition put in the bill, fundamentally misunderstands what we are trying to do, which is to empower the shareholders to express their opinion.

Members keep saying it is simply only advisory. I do not think, Mr. Chairman, that anyone believes that. I do not think that anyone thinks that an advisory vote of shareholders would be easily dismissed by boards of directors.

One final point, the suggestion if we do this, the boards of directors and CEOs in pique will take their companies private, when presumably they otherwise wouldn't, because that is the only way it could be causal, what a condemnation of CEOs. How dare you vote on my pay? I will take my company private.

By the way, in fact, you can't take the company private over the shareholders' objections.

I just want to repeat the point I made. This threat that we will take the company public, the CEO will take the company public, understand what that says: That if the CEO's pay is subject to a shareholder vote, in retaliation, he will make a fundamental change in the ownership structure. And, by the way, that assumes that the shareholders don't have anything to say about it. No, I do not think that shareholders will sit and vote for a takeover of the company just to allow the CEO to shelter his or her pay; so this threat, I think, is an empty one.

Mr. Chairman, would the gentleman yield me 1 minute? I will talk fast.

I just wanted to say that this does not in any way enhance democracy. The notion that if you vote against this bill, you vote against democracy, makes no sense.

The gentleman says it is an incentive to make the corporations do this. Apparently he believes that, assuming a nonbinding, ineffective, toothless advisory vote will provide a major incentive to corporations to make a major structural change; I don't.

I think the gentleman from North Carolina did correctly state my view, but my position was not simply to keep this bill clean, we did accept a couple of technical amendments. I would point out to him, in committee, the gentleman from Connecticut (Mr. Shays) had a substantive amendment, which we accepted, dealing with rights.

My view is this: I agree on the principle that a fiduciary's vote should have to be made public, but I wouldn't want to limit it only to pension funds. I also don't think it should be limited only to this subject matter, although I agree, given germaneness, the gentleman couldn't have broadened it beyond that subject in this bill. But it could be broadened beyond pension funds.

I believe we should have a hearing on the principle where the gentleman is correct, and I agree with him, that fiduciaries should have to be made public, but that is all fiduciaries on all issues.

I appreciate that spirit of cooperation, but it is getting late, and Friday is coming, so I would offer either a letter or roll call, but not both.

I have just been advised by staff, who is very knowledgeable on this, that part of the problem is, and I understand the gentleman has, as I think is appropriate, substantively the model of what was done with mutual funds, but I have been reminded that the SEC has a plenary power over mutual funds that it

does not have over foundations. I have now been instructed that the SEC could not do that. You cannot reason that what they can do over mutual funds to what they can do over these other fiduciaries, so I think it would take separate legislation.

Mr. Chairman, I move to strike the last word.

I am disappointed in the characterization. In the first place, it is not accurate that germaneness prevented this from being a broader amendment. As I acknowledged, germaneness does prevent this from getting into other subject matters. But nothing would have prevented this from applying to the other entities that my colleague from North Carolina enumerated. Nothing would have said that other fiduciaries could have been covered. And that is why I am against this amendment.

Frankly, we have a difference between the parties here to a very great extent on labor unions and the contribution they make to the United States.

Yes.

No, I will take back my time to say to the gentleman, I will not legislate on serious subject matter involving large numbers of institutions on a unanimous consent agreement to an amendment that he filed when he could have filed whatever he wanted at a quarter to 8 or at any other time. I think there should be hearings. I have said we will do this.

You know, the gentleman on the other side may, with the motions to recommit, believe in the 5-minute solution to complex problems. I don't. I think it degrades the legislative process. I will not be a party to it. I will not agree.

The gentleman could have filed any amendment he wanted to that was germane. He could have filed a broader amendment. We could have had more debate and discussion on it.

I do not agree I or he or any of us off the top of our heads are able to decide how better to broaden this. And there is a disagreement between us about labor unions. Let's make it explicit. That is partly what is involved here.

There has been a degree, I believe, of denigration and demonization of labor unions, that is part of the reason I think we have the economic inequality we have. For pension funds I read labor unions because they are identified with unions.

The gentleman from North Carolina, who is a very good lawyer, mentioned a number of other entities that should be covered if you were going to be covering fiduciaries. I do not think it is accidental that only pension funds are mentioned. I think that bespeaks this notion that labor unions are somehow in need of more supervision, that they are more damaging and dangerous. I think the opposite is the case. I think there have been abuses from foundations. There have been some abuses from unions. So that is why I object to doing this, because I do not think it is the first step. I think it is part of a denigration of the role of labor unions from which this country suffers. Indeed, I will just say I am struck as we debate now whether or not to put standards from the international labor organizations into our trade treaties. We are now being told by opponents that we can't do that because America doesn't meet those standards; that because of the years of denigration of the labor unions, we don't meet those standards. So I do not agree to single out pension funds because I do not agree that we should join in this somehow, this suspicion of unions. And I don't agree that in a unanimous consent agreement off the top of our heads we ought to decide how more broadly to do it. I would rather legislation responsibly.

The committee that we are all members of, those of us who are now on the floor, has been, I think, a very thoughtful forum, not just under my chairmanship, under the chairmanship of my predecessor. We have hearings. We have an excellent staff on both sides. We have worked together.

I look forward to hearings on extending the principle of fiduciaries having to reveal how they have voted on all issues and to all fiduciaries. But I do not think we should single out pension funds tonight, nor do I think we should on the fly try to broaden it, so I oppose the amendment.

And I will yield now to the gentleman.

All votes.

Well, it is late and I am sometimes cranky. I can't say that I would be happy to work with the gentleman, but I would be willing to.

I will take back my time to say that you cannot, the gentleman could have offered a broader agreement. I do not agree. Yes, I would ask for unanimous consent to make a slight technical change in an amendment to fix wording. But to go into a much broader version of the subject, under these circumstances, without a hearing, without full participation in a mark up would be inappropriate, and that is what I mean by on the fly.

Mr. Chairman, I move that the Committee do now rise.

Mr. Chairman, I yield myself such time as I may consume.

I rise, Mr. Chairman, in opposition to H.R. 1257. But first of all, I want to compliment the chairman and the ranking member who ran a very good process, had fruitful hearings, but nevertheless I think came up with a faulty product.

We all tend to sometimes argue in the alternative, picking and choosing those things that we want to focus on, and I find it ironic that the chairman has, in one way, this very, very high view of the marketplace and, in another way, demonstrates a fairly low view of the marketplace.

This is all about the level, Mr. Chairman, at which we choose to intervene. We saw the marketplace respond positively just a couple of weeks ago. Morgan Stanley, at their annual meeting, those shareholders decided not to take up this question of executive compensation. The same thing happened, Mr. Chairman, at the Bank of New York recently.

So what is the question before the House today? The question before the House is, when there is a difficult situation that comes forward, admittedly a difficult situation that the chairman recently called a fact of nature, and that is overly compensated executive employees, what does the House do? Does the House rush in?

I would suggest that the bill as presented currently is an overreaction. It is reaching in, and if we are going to be dabbling in this notion of executive compensation, Mr. Chairman, then I would suggest that we need to go all the way and try and take on other highly compensated employees.

What we will hear, I think, from the various speakers on our side of the aisle is trying to lay out a rationale, trying to lay out how we ought best to do this because I will tell you this. I think the great challenge before us as Members of the House is, how do we create the environment where people want to invest in our country, how do we create the environment where the best and the brightest among us want to go into public companies because I will suggest, Mr. Chairman, that the reaction of the past Congress or two on some of these things has unfortunately created an environment that is regulatorily very, very difficult, and it now creates among us the problem of people who say, look, it is simply not worth my time to go into a public company. I am one of the sharp ones; I am going to go into the private equities and so forth.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 5 minutes to the gentleman from Delaware (Mr. Castle).

Mr. Chairman, I yield 1 minute to the gentleman from Delaware (Mr. Castle).

Mr. Chairman, just a couple of observations before I yield to my distinguished colleague.

You know, the gentleman from Georgia said that one of the goals of this legislation is that there be transparency and accountability. I would submit, I think there is a transparency and accountability in the current state of the law. The transparency comes in the disclosure of executive compensation, and the accountability comes in the ability to sell shares if you don't like it. That is a very, very, very powerful tool.

My friend from Missouri, the distinguished gentleman who spoke recently kind of criticized a number of individual CEOs. I'm not going to rise to their defense, and I don't think they really deserve defense. But it is an old adage of the law that if what we are doing is creating a statute toward an exception, we tend to make bad statutes.

What I would say is, look at the totality of what executive leadership has brought us. From 2002 to 2006, the market capitalization of American companies has risen to $8 trillion. That is something to celebrate and not something to criticize.

I yield 5 minutes to the gentleman from Texas (Mr. Paul).

(Mr. PAUL asked and was given permission to revise and extend his remarks.)

Mr. Chairman, I yield 5 minutes to the gentleman from California (Mr. Campbell).

Mr. Chairman, I yield myself 1 minute.

Just kind of a point of interest, and that is, in response to Chairman Frank

calling, observing Mr. Castle's quotation. And I would just point out that the distinguished gentleman from New Jersey has been sort of selective, I think, in the attributes of England that he finds attractive. One of those that he didn't find attractive apparently is a loser-pay litigation system which would also maybe drive part of that debate.

Mr. Chairman, I yield 2\1/2\ minutes to the distinguished gentleman from North Carolina (Mr. Jones).

Mr. Chairman, I yield such time as he may consume to the gentleman from Alabama (Mr. Bachus), the ranking member.

Mr. Chairman, I yield myself the balance of my time.

I will insert into the Record three letters opposing this legislation by the

U.S. Chamber of Commerce, HR Policy Association and American Bankers Association.

The Association of Senior

Human Resource Executives,

Washington, DC, April 18, 2007.

RE HR Policy Opposes H.R. 1257, Shareholder Vote on Executive

Compensation Act.

Hon. Spencer Bachus,

House of Representatives, Rayburn House Office Building,

Washington, DC.

Dear Representative Bachus: On behalf of the HR Policy

Association, I am writing to urge you to vote no on H.R.

1257, the Shareholder Vote on Executive Compensation Act,

when the House considers it this week. We believe that the

bill will have significant negative effects on corporate

governance and will not appreciably increase shareholder

input into the executive compensation process.

HR Policy Association is a public policy advocacy

organization representing the chief human resource officers

of over 250 leading employers doing business in the United

States. Representing nearly every major industry sector, HR

Policy members have a combined U.S. market capitalization of

more than $7.5 trillion and employ more than 18 million

employees world wide. Our members are especially concerned

that a shareholder vote would undermine the authority of the

Board of Directors with respect to compensation and is

unnecessary as a tool to increase communications with

shareholders.

At the outset, it is important to note that last year, the

U.S. Securities and Exchange Commission completed an overhaul

of its executive compensation disclosure regulations. The

full effect of these changes on executive compensation

practices will not be known until after the 2009 proxy

season, the first year in which companies will have to

present three years of data. At a minimum, the House should

defer any action on the legislation until after the effect of

the new rules can be fully evaluated.

The Association believes that H.R. 1257 would seriously

erode the authority of the Board of Directors to determine

appropriate executive compensation levels. Under our system

of corporate governance, the Board manages the company on

behalf of the shareholders. In turn, the shareholders have

the right to vote on strategic matters, such as mergers, and

remove directors if they believe the corporation is not being

managed in the shareholders' best interests. This delegation

of authority is necessary because of the considerable amount

of detailed and confidential information that Board members

must consider when making decisions regarding corporate

strategy and executive compensation. Providing a shareholder

vote on compensation would be unprecedented because it would

provide a referendum on the results of the Board's decision,

rather than on a framework for making decisions, as occurs in

the case of shareholder authorization for equity compensation

or mergers.

More importantly, a shareholder vote would potentially open

up other Board decisions to a shareholder vote, such as the

decision to pursue merger talks or settle certain lawsuits,

thus substantially slowing the ability of the Board to make

quick decisions and undermining competitiveness.

Fundamentally, an advisory shareholder vote would not

provide meaningful information to companies about the

practices shareholders find objectionable. It is simply an up

or down vote, with no explanation attached, leaving

substantial questions about its meaning. Under current law,

shareholders already may file advisory resolutions with any

publicly held company seeking changes in specific executive

compensation practices. There is no need for legislation

adopting a mandatory framework that will have a negligible

impact on most of the 15,000-plus publicly held companies.

Counter to arguments made in support of the bill, new

mechanisms of communications between companies and

shareholders are not necessary. Most large companies already

hold periodic meetings throughout the year with their largest

shareholders on a variety of subjects, including

compensation.

In addition, the shareholder vote concept has been imported

from the United Kingdom, but the U.K. regulatory and legal

systems are substantially different from those in the U.S.,

and the results of a shareholder vote are likely to be

fundamentally different. In the U.K. the two largest

investors control roughly 30 percent of the market while in

the U.S. ownership is more diffuse, making shareholder

consensus much more difficult. The U.K. has voluntary

corporate governance standards with less rigid standards for

Board member independence, and Board members may avoid all

liability with an advisory shareholder vote. In the U.S.,

Board members have fiduciary liability, and are subject to

shareholder derivative actions, regardless of a shareholder

advisory vote. The threat of litigation acts as a check on

Board actions.

The U.K. shareholder vote requirement also has had

significant negative effects that would negatively impact the

management of U.S. companies. These effects include

encouraging executives to seek positions with private equity

firms; making pay arrangements more standardized, rather than

customized to the company; increasing diligence among

compensation committees similar to that already occurring in

the U.S.; and, increasing the power of the proxy advisory

services and hedge funds as institutional investors outsource

their compensation research, engagement with boards and vote

administration duties. These negative effects outweigh the

benefits of a shareholder vote.

For all of these reasons, we oppose H.R. 1257 and encourage

the House to reject it. If you have any questions, please do

not hesitate to contact Tim Bartl of our staff at 202-789-

8670. Thank you for your consideration.

Sincerely,

Jeffrey C. McGuiness,

President.

Mr. Chairman, I have an amendment at the desk.

Mr. Chairman, I have offered this amendment to clarify some possibly misleading language in H.R. 1257, and it simply strikes ``or other meeting of the shareholders'' and inserts ``meeting of the shareholders or a special meeting in lieu of the annual meeting,'' at page 4, line 14 and page 5, line 7. The bill would allow, as we have discussed, a separate, nonbinding shareholder vote to approve the compensation of executives for any proxy, consent or authorization for an annual meeting. As currently drafted, the language in the bill asserts that this would be an annual meeting or other meeting of the shareholders. This language could potentially lead to allowing multiple nonbinding shareholder votes throughout the year instead of just at the annual or special meeting in lieu of the annual meeting, and, therefore, clarification of this language is needed. Hence, the reason for the amendment.

My concern is that if the current language were to be placed into law, that multiple votes would be forced to be taken throughout the year which would distract the board and the executives from their primary responsibility, that is, ensuring that they put in place good business practices that benefit the shareholders' investment instead of being distracted multiple times by a whole host of votes.

The greater concern would be that these potential multiple votes would ensure fiscal and business priorities are not in the forefront of the board members' minds, ultimately having the ill effect on global competitiveness of American business. I spoke to the chairman earlier, and I believe that it's a noncontroversial request to clarify language.

I urge all of my colleagues to support the amendment.

Mr. Chairman, I move to strike the last word, and I yield to the gentleman from New Jersey (Mr. Garrett).

Mr. Chairman, I move to strike the last word.

I rise to point out that there is some dizzying logic going on. Basically, we are being told, here is a piece of legislation, and if you are clever enough to come up with a germane amendment, we will sort of humor you and listen to you. But if there is a larger suggestion, then it is very difficult to move forward.

I would just suggest to the chairman of the committee that the perfect is the enemy of the good. It strikes me that the gentleman from Massachusetts is an incrementalist. Those who survive most in this arena are incrementalists, and he has survived for a long, long time, Mr. Chairman, and flourished and been very successful as a legislator.

But it just seems that this is a good faith effort on the part of the gentleman from North Carolina to put forward something substantively. Is it the totality of making every problem go away? No. There is no way to do that.

And it is a little bit of a procedural Catch-22 that he is in.

Mr. Speaker, by direction of the Committee on Rules, I call up House Resolution 301 and ask for its immediate consideration.

Mr. Speaker, I ask unanimous consent that all Members be given 5 legislative days in which to revise and extend their remarks on House Resolution 301.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, for the purpose of debate only, I yield the customary 30 minutes to the gentleman from Texas (Mr. Sessions). All time yielded during consideration of the rule is for debate only.

Mr. Speaker, H. Res. 301 is an open rule with a preprinting requirement providing for the consideration of H.R.

1257, the Shareholder Vote on Executive Compensation Act. The rule provides 1 hour of general debate, controlled by the Committee on Financial Services. The rule waives all points of order against consideration of the bill except clauses 9 and 10 of rule XXI. The rule makes in order the Committee on Financial Services amendment in the nature of a substitute as an original bill for the purpose of amendment, which shall be considered as read. The rule requires that any amendments to the bill must be preprinted in the Congressional Record on or before Tuesday, April 17, 2007. Finally, the rule provides one motion to recommit, with or without instructions.

Mr. Speaker, I rise today in support of this open rule. This is a good, appropriate rule that allows any germane amendment to be debated and voted on by this body, as long as that amendment was preprinted in the Congressional Record. This rule is appropriate because it allows for real debate and for up or down votes on matters related to this bill. I believe this is a good process, and I want to commend both Chairman Frank and Ranking Member Bachus for requesting this rule and for testifying in support of this rule in the Rules Committee yesterday.

I also rise in support of the underlying legislation. The purpose of this bill is straightforward. H.R. 1257, the Shareholder Vote on Executive Compensation Act, allows for shareholders of a publicly traded corporation to conduct annual nonbinding advisory votes on the compensation of the corporation's executives. Basically, this bill would allow the shareholders, those with the most vested interests, to express their approval or disapproval of a company's compensation practices.

Let me be clear. This bill does not force a company to accede to the vote, nor does it overrule a decision by the board of directors of a corporation. Instead, it allows the shareholders to demonstrate their public approval or disapproval of a corporation's compensation practices. The bill does not allow shareholders to set caps on the size or nature of executive compensation.

By allowing for an annual vote by shareholders, H.R. 1257 goes one step beyond the recently enacted regulation by the Securities and Exchange Commission, which only requires that the amount in executive compensation be disclosed.

Mr. Speaker, this legislation would require public companies to include this nonbinding shareholder vote in their annual proxy statement to shareholders. An additional nonbinding advisory would also be provided to shareholders if the company awards a new compensation package while simultaneously negotiating the purchase or sale of the company.

By taking this step, H.R. 1257 increases accountability, and also enables the SEC to better monitor the executive compensation practices of corporations. I hope that my former colleague from California, Chris Cox, now the Commissioner of the SEC, feels encouraged by this legislation and works toward further protecting shareholder rights.

Over the past year, CEOs of major corporations have received multimillion-dollar severance packages, despite falling stocks and market share drops during their tenures. These so-called ``golden parachutes'' highlight the disparity between shareholders' rights and executive compensation oversight.

In addition to neglecting shareholders' interests, current executive compensation practices actually hurt the long-term corporate value of a company. Unprecedented growth in executive compensation over the past two decades has taken money out of the pockets of shareholders and compromised the long-term interests of too many companies.

According to the Corporate Library, in 2006, the average CEO of a Standard and Poor's 500 company received $14.78 million in compensation. It is only fair that the shareholders, the people who actually foot the bill for severance packages, have the opportunity to express their support or disapproval of their company's executive compensation.

H.R. 1257 empowers shareholders and complements the SEC's current regulations regarding executive compensation.

Mr. Speaker, I urge my colleagues to support the rule and the underlying bill.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, again I would remind my colleagues that this is an open rule that allowed every Member of this House to be able to offer an amendment if that Member so desired. In fact, as the gentleman from Texas pointed out, he himself will be offering an amendment. And so I think this rule deserves support.

I should point out for the record that when the gentleman's party, the Republic Party, was in the majority here, that even though I was on the Rules Committee, routinely Members were denied the right to even offer their amendments. There were 13 Members who have decided to offer amendments. Ten of them are Republican. I think this is a fair process and this rule deserves support.

Having said that, I would like to yield 4 minutes to the distinguished gentlewoman from Florida (Ms. Castor), a member of the Rules Committee.

Mr. Speaker, at this time I would like to yield 10 minutes to the gentleman from Massachusetts, the distinguished chairman of the Financial Services Committee (Mr. Frank).

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, let me first of all say that I apologize to the gentleman from California, the former distinguished chairman of the Rules Committee, for this open rule. I guess he is upset that 13 Members have decided to offer amendments. They have known about this bill, by the way, for close to 3 weeks. So 13 Members, 10 of them Republican, have decided to put forward amendments that will be debated and considered on this floor, including the distinguished gentleman from Texas (Mr. Sessions).

I do not know whether the gentleman from California wants me to apologize to Mr. Sessions and the other Republicans for allowing their amendments to be made in order, but the bottom line is, what we are trying to do is break the trend that existed in the Rules Committee when they were in charge, which is that nobody would be allowed to offer amendments on the floor.

One of the things that this leadership has promised is a more open process, a process that is more fair, and that is what we are trying to do today. There are 13 amendments that have been pre-filed. They will all be considered on the floor unless the people who printed those amendments do not want to offer them. That is a fair process.

As somebody who sat on the Rules Committee for many years and who routinely saw closed rules reported under that committee with not a peep from anybody on that side, it is a little bit hard to digest this whining over an open process. I guess my colleagues on the other side of the aisle object to the fact that Members should have a right to read an amendment that they are going to vote on. I can understand that because they would routinely bring huge bills, hundreds of pages in length, to the floor without giving anybody in this Chamber the opportunity to read them. Those practices hopefully are over for good.

This is a fair rule. This is an open rule, and I urge my colleagues to support it.

At this point, let me inquire from the gentleman from Texas whether or not he has any additional speakers, because at this point, I am the last one on this side.

I would let the gentleman proceed, and I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, if the gentleman from Georgia thinks this rule is such a bad idea, I hope that maybe he might reconsider offering the three amendments that he has pre-filed.

Let me just say for the record, because I think it is important to state this, the gentleman from Georgia just went on a rant, and in the previous Congress when his party was in control, in the entire Congress there was one open rule that was not an appropriation bill, one, and I do not recall a single instance when the gentleman from Georgia ever came to the floor and complained about that. I do not recall a single instance when the gentleman from Georgia or, quite frankly, anybody on the other side came to the floor and objected when the Republican- controlled Rules Committee waived the requirement that Members have 3 days to be able to read a report before a bill was considered.

I don't remember a single instance when the gentleman from Georgia, or, quite frankly, anybody who we have heard complain today, ever came on the House floor and voted against a closed rule. They ran this place under the most restrictive closed process in the history of this Congress.

I think that needs to be said for the record because it goes to the point that I was making earlier that I don't understand what all the complaints are about. You have every Member who wanted to offer an amendment to this bill given the opportunity to do so.

They knew that this bill was coming 3 weeks in advance. They could have thought about it for 3 weeks, they could have instructed their staff during that period of 3 weeks to come up with something. Obviously, a number of people did, including the gentleman from Georgia, who has three amendments we are going to have to listen to.

Let me again urge my colleagues to support this rule. It is a fair rule. It is an open rule.

I am sorry if they don't like the fact that Members ought to have an opportunity to read amendments and read bills before they are voted on, but I think that is a fair thing to do. Of course, when they were in charge, they would routinely waive that right. But, you know, we will respect that.

Mr. Speaker, I reserve the balance of my time and would ask the gentleman from Texas if he has any additional speakers.

Mr. Speaker, let me urge all my colleagues to support the rule and to also support the underlying bill. H.R. 1257 is a good bill. If you want to defend the status quo, then vote against it. But if you want more accountability, more transparency, then vote for it. This should not be a partisan issue, and I hope that it would get a strong bipartisan vote on passage.

Let me again urge my colleagues to support the rule, and this is a rule that allows the gentleman from Texas to be able to offer an amendment. It allows the gentleman from Georgia, whom we

heard earlier, to offer three amendments. It allows for every single Member of this House, Democrat or Republican, to be able to offer an amendment to this bill.

This is something new compared to the way the Rules Committee was run under the previous leadership. This is a rule that allows people to be able to heard, to be able to bring their views to the floor, and to be able to debate them. For the gentleman from Texas or the gentleman from Georgia or anybody else to complain that somehow this is a restrictive rule just defies the facts.

The fact of the matter is that under their leadership, restrictive rules were the norm. Closed rules were the norm. Not once, not once did I hear anybody on the other side complain about the restrictive rule or closed rule or even vote against the closed rule. This allows every single Member who wanted to offer an amendment to offer an amendment.

This is an open rule with a preprinted requirement. This is a good rule. I would urge all my colleagues to support the rule.

Mr. Speaker, I yield back the balance of my time, and I move the previous question on the resolution.

I thank the gentleman and the Rules Committee for bringing forward an open rule.

I often disagree with my colleagues on the other side, but I have rarely before been as baffled by the illogic of their argument as I am today. I do not recall the last time I heard such a hodgepodge of inconsistency and inaccuracy.

This is a bill that has been condemned for being, A, bullying and intrusive, and B, toothless. The toothless bully is, I guess, a new concept. In fact, let me begin with this denigration of the notion of nonbinding resolution.

The gentleman from Texas kind of slipped, I think, when he said ``the sense of shareholder resolution.'' In fact, we spend much of our time passing nonbinding resolutions. Members who think nonbinding resolutions are a waste of time probably should just show up on Wednesday because that is all we do generally on Mondays and Tuesdays, although we are doing more since we have taken over.

But let's get to more of the substantive mistakes. My friend from Alabama said we would be second-guessing every corporate salary. Of course not. That isn't even remotely close to being even partially true. We have deliberately said it is not our job to say what the salary should be. We are empowering the shareholders to voice their opinion.

Now, I will acknowledge at the outset, if a board of directors sees a vote and the majority of the shareholders vote ``no'' and they decide to vote ``yes,'' the board has that right. I doubt that the board would do that much. In fact, I would not impute to the boards of directors what my colleagues impute to them, a contempt for the views of shareholders. There may be individual cases where shareholders didn't understand certain things, new events may have intervened. But, no, I do not believe that as a general rule people on the board of directors will ignore shareholders.

And by the way, we are talking about the shareholders, and I know the gentleman from Texas said they are outsiders, they are activists, as loathsome a word as the rules of the House will allow as he would use it. They own shares. They are the owners of the companies. What a denigration of the people who are in other contexts the fountain of all wisdom. We are told the market is, after all, the best source of wisdom.

The former majority leader from Texas used to say, governments are dumb; markets are smart, markets work well. Well, who is the market? The market consists of the people who own the shares in this case. How did they become so dumb when it comes to deciding how to pay for the people that work for them?

And we are told, okay, if they don't like it, they can sell their shares. What a concept of ownership. I mean, these are the people, many of them who are outraged at the eminent domain issue. What they are saying is, if you have owned shares in a company for a while, you have made your decision that this is the best way to diversify your portfolio, and then some board makes a decision with which you disagree, that you think may hurt the company, sell your shares. What kind of a denigration of the notion of ownership is that?

There are, of course, people who will tell you, wait a minute, what if I believe when Home Depot, for instance, did what it did with Nardelli, it had a very negative effect on people's perception of the company. One of the very decisions you disagreed with led to a drop in the value of the shares because the market said, why did they do that. Should you then sell your shares and be forced to take a loss or take corrective action and restore the value to your shares? That is what we are talking about. It is very simple.

And then the oddest one of all is, how dare we interfere with corporations? Corporations are artificial creations of positive law. God made no corporations. No corporations evolved. I will be neutral on that subject. Corporations exist because the law of a jurisdiction creates them. It creates them to give them certain advantages, certain immunities, et cetera.

Of course, the government tells corporations what the rules are. This notion that we are interfering with corporations is nonsensical. They exist according to positive law. And the law says, you must do this, you may not do that. That is what corporations are.

And now the gentleman will say, oh, well, look what the SEC did, we don't have to get involved. What the Securities and Exchange Commission did was very intrusive. And the gentleman said, well, the corporation can do that if they want to; they could have published the salaries if they wanted to. The Securities and Exchange Commission said, we mandate you to print these salaries.

And by the way, to the extent that there is an expense, it is much more in what the SEC did than in what we did. CBO has concurred, there is zero, maybe 8 cents expense here. The SEC has already mandated that the corporations print in the proxy form all this information. We mandate that they add a box, ``yes or no.''

And then my friend from Alabama, great civil libertarian, but on this one I think he may have gotten a little too extreme in his civil libertarian zeal, he said, we are making the shareholders vote. It sounded like he said we are standing over those poor shareholders with a whip and making them vote. Well, in the first place, we are not. Abstention remains an option for shareholders.

Secondly, the argument is, well, they already have that right, some of them. No, they don't in every case. There are corporations that have refused to allow it. AT&T was just ordered by the Securities and Exchange Commission to allow this procedure, but it was a case-by-case issue. It is not a general rule. So the SEC that you defend just ordered AT&T to do this, they just intruded, as is their right; but there is not a general principle.

Shareholders do not have a right to have this vote on executive compensation. And this bill simply says, the people who own the company take what the SEC has mandated they put forward, has a right to vote on it. Now we are told, and the gentleman from Texas, in a stirring peroration, said he stood for truth, justice, the American way, et cetera; and said, let's reject the European effort.

Well, this is not a general European practice, it is a practice in England, what we are talking about. There is a committee that is known as the Paulson Committee, because it was inspired by Secretary of the Treasury Paulson, chaired by Professor Scott of Harvard. There was the McKenzie report, done by Mayor Bloomberg, strongly supported by the Chamber of Commerce and all the financial groups. They have said to us, can't you guys be more like England in your regulation of corporations?

Listen to the debate going on right now over relations of corporations in America. We are being told that the

model is the British model, the Financial Services authority. This is Secretary Paulson's committee that said it, this is the Chamber of Commerce.

Yes, the English do do this, it is not a big continental thing. But if, in fact, you think we should be very careful never to do anything because the English are doing it, then where is the repudiation of the McKenzie report and the Paulson Committee report which have urged the SEC to follow the model of Financial Services.

In fact, it is very straightforward. Here is the problem. Why do normally coherent Members talk in less than coherent form about this, making contradictory arguments, ignoring reality?

Here is the deal. My friend from Alabama said, I am not here to defend CEO salaries. But in fact he is, because what this bill says is, the shareholders, not the outsiders, not those evil activists, not those lurking labor agitators, people who own shares. And, by the way, this is strongly supported by the leaders of institutional shareholders, large pension funds, The Corporate Library. Shareholder groups are in favor of this. And it says that people who own the shares should be able to vote in an advisory capacity on whether they think the compensation is too much or too little.

Now, the fact is that the gentleman from Alabama said there have been outrageous examples of excessive compensation. It is going up in general to the point where it is a record problem, and he says he is not here to defend them. He is not here to defend them verbally, he is just here to defend them parliamentarily, because if this bill dies, then they are totally unimpeded. And Members have said, don't rush in. Well, these salaries have been going up for a long time, and this is a long-time trend. So if not this, what do you do? It is true, the SEC went to the limits of its power.

I yield to the gentleman from Alabama.

In the House. Yes, sir.

The gentleman misunderstands my point, and I will correct it. I am taking back my time. I was not referring to the gentleman's de facto defense of the salary; I was referring to the gentleman from Texas' statement.

He denigrated the product of this legislation because it would produce a nonbinding resolution. In fact, he sneered at it as a sense of the stockholder, sense of the shareholder resolution. And my point was aimed at his argument that the notion of a sense of the resolution is meaningless would invalidate a lot of what we do. So that is the issue I was making.

Let me just say in closing, Members on the other side sometimes get separation anxiety when they are forced to differentiate themselves from particular corporate abuses. They brought themselves to do it with Sarbanes-Oxley, but they are having in various ways buyer's remorse there, I think excessive buyer's remorse.

Members say we don't like corporate excesses, but we can't do anything about it.

Well, no, Congress should not substitute its judgment for the market, Congress should not set the salaries. What Congress can do is to empower the shareholders who own the companies to express their opinion. It is not a right that the shareholders uniformly have now. It is Congress in exercise of the legislative power to set the rules for corporations, which is inherent in the nature of corporations saying that on this one issue; and by the way, one reason for singling them out is, there is reason to believe that the relationship between the boards of directors and CEOs is not sufficiently arm's length for the decision to be left entirely to the board without input.

It doesn't mean you take the decision away from the board elsewhere. It simply says there have been excesses in corporation compensation, we think it would be helpful if the shareholders could give an advisory vote.

There is really no good argument against it, and that is why we have heard arguments against that aren't very good, that aren't very logical, that aren't based in reality. That is all we are voting on.

And in the absence of this bill, Members can then take credit for continuing to enable salaries paid to the top executives to go up and up and up. And if you are a shareholder of a corporation and you think that is a mistake and you think that is damaging, you have the option, we are told, of selling your shares at a loss, of being excluded from an investment decision that you think is in your interest. That is not acceptable.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise today in opposition to this rule and to the underlying legislation, which I think constitutes an unnecessary and unwarranted Federal intrusion into the free enterprise system and the private sector. The legislation that the Democrat majority has brought to the House today would create a new Federal mandate on publicly held companies, but does so in a half-hearted way that would have absolutely no practical impact on its purported goal of improving disclosure and addressing ``excessive'' executive compensation.

The Democrats' Shareholder Vote on Executive Compensation Act would force every publicly held company to bear the costs of administering a toothless, nonbinding shareholder vote on pay packages of its highest compensated officials during every proxy vote. It is unclear, however, what the outcome of this vote, which under current rules could already happen today at any publicly held company, would mean for the company, the board of directors, executives or the shareholders.

Yesterday in the Rules Committee, Chairman Barney Frank testified that this vote was not intended to create a new fiduciary responsibility for board members. Even if a majority of shareholders agreed that a company's executives were being compensated too generously, there are no provisions in this legislation to obligate a board to comply with this decision.

So if a board does choose to ignore an affirmative vote, again according to Chairman Frank's testimony in the Rules Committee, since there is no fiduciary responsibility and no private right of action created by this new mandatory shareholder vote, there is no legal recourse provided in this bill for shareholders to force board compliance.

So rather than demonstrating the courage of their convictions that executive pay is wildly out of control in this country and that shareholders should be able to rein it in unilaterally through a ballot process, Democrats have chosen to bring legislation to the floor today, forcing private entities to take an action that they are already capable of taking by their very own nature. But this would make this new mandatory vote little more than a weak ``sense of the shareholder'' resolution that can be simply ignored by a board with impunity.

I am also extremely surprised, Mr. Speaker, by the Democrat leadership's recent conversion to the merits of democracy in determining an organization's actions. Less than 2 months ago, this same leadership brought to the floor legislation that strips American workers of their right to use a secret ballot to decide whether or not to unionize and provides for unprecedented intimidation of employees by union bosses under a fundamentally antidemocratic process known as ``card check.'' But I suppose the Democrats' new-found selective commitment to democratic principles is better late than never.

The reality is that shareholders already have a democratic option available to them if they think that a board is shirking its fiduciary responsibilities to investors. They can sell their shares and vote with their dollars. This is a basic principle of how markets work in a free enterprise system, and it has been the steadfast commitment to principles like these that has made the American economy the envy of the world over the last decade, even while economies across Europe have stagnated and shrunk.

Mr. Speaker, Mr. Frank has represented to the House that the real aim of this legislation is not to create a new class of lawsuits for the trial bar to exploit, and I take him at his word. But that leaves only one sensible explanation for why the Democrat majority would bring such a toothless bill to the floor of the House today, and that is to provide outsiders, such as Big Labor bosses, environmentalists and so- called ``consumer activists,'' with a new avenue to criticize the management of corporations and to compel boards to do their bidding.

Information about executive compensation is already fully disclosed to investors, who have every opportunity to determine whether or not it is too generous before becoming an owner of a listed security. And under this bill, even if they decide that it is too generous, the legislation contains no enforcement mechanism. This legislation simply provides a foot in the door for outside organizations to try to bully boards of directors in hopes of weakening management and gaining concessions down the road. This bill does nothing to improve corporate governance. It does nothing to improve board decision-making or increase shareholder value. That is why I have submitted an amendment that would force any person or organization who spends a significant sum on trying to influence the outcome of this new mandatory vote to disclose who they are, how much they have spent and on what activities so that investors can have a full picture of who is trying to influence them in this decision-making process.

While I think this amendment would improve a misguided bill, I am not holding my breath at all that the majority party will join me in standing up for increased transparency. But who knows? Today we learned that they have radically changed their opinion on the merits of secret ballots, so perhaps they will stand up for transparency in proxy vote influence-peddling also.

Mr. Speaker, I oppose this rule and the weak underlying ``sense of the shareholder'' legislation. Congress can do better than this. And rather than mimicking the interventionist economic policies of Europe, I believe we should reject this legislation and stand up for what sets our economy apart and has spurred our continued economic and job growth while others sank, which would be a commitment to free markets and an understanding that when given information, investors can make good decisions on their own.

Mr. Speaker, I stand up for the free enterprise system and the American way of doing business.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, at this time I would like to yield 5 minutes to the ranking member of the Committee on Financial Services, the gentleman from Alabama (Mr. Bachus).

Mr. Speaker, I do appreciate the gentleman from Massachusetts speaking so clearly about what is happening. I would clarify my words and say to the gentleman, I do believe that it would be appropriate to have anyone who is attempting to influence an outcome of a vote, that they should have a requirement upon them to identify themselves, to state how much money they are spending and the activities that they are engaged in. And I think that that is full disclosure also about the activities that could take place under this new nonbinding resolution that we are attempting to pass.

Mr. Speaker, at this time, I would yield 5 minutes to the ranking member of the Rules Committee, the gentleman from San Dimas, California (Mr. Dreier).

Mr. Speaker, I thank the gentleman for the inquiry. At this time, we have one additional speaker.

Mr. Speaker, I yield 4 minutes to the gentleman from Georgia (Mr. Price).

In response to the gentleman at this time, I do not have any additional speakers. I would use this time for my close. I thank the gentleman for the inquiry.

Mr. Speaker, I think the point that would be taken here would follow those words that David Dreier spoke on, and that is, we simply call things what they are honestly. We don't try to call things what they aren't. We follow the regular order of this House, as has been established, going back at least to the 103rd Congress when Mr. Moakley, the chairman of the Rules Committee, said, this is what we will call things, this is what an open rule is, this is what a modified rule is. That is the point we are trying to make today, that you should call something what it is.

At this time, I would like to include a statement of administration policy on this bill.

Statement of Administration Policy--H.R. 1257--Shareholder Vote on

Executive Compensation Act of 2007

(representative frank (d) massachusetts and 27 cosponsors)

The Administration opposes H.R. 1257, which would require

public companies to hold a separate advisory shareholder vote

to approve the compensation of executives. The Administration

does not believe that Congress should mandate the process by

which executive compensation is approved.

The Administration supports full transparency to

shareholders regarding executive compensation decisions.

Recent enhancements in corporate governance and disclosure

have strengthened the executive compensation decision-making

process of boards of directors. Corporate governance changes

have made boards more independent, including through the

establishment of compensation committees composed solely of

independent directors. In addition, as a result of the

Securities and Exchange Commission's revised disclosure rules

on executive compensation, which recently became effective,

shareholders are receiving comprehensive information on

executive compensation. Before additional corporate

governance requirements are legislated, the Administration

believes that recent enhancements should be given time to

take effect.

The statement of the administration is quite succinct, and that is at the end of this statement it says ``before additional corporate governance requirements are legislated, the administration believes that the recent enhancements should be given time to take effect. That is in reference to the SEC and what the SEC had done.

Mr. Speaker, I am asking Members to oppose the previous question so that I may amend the rule to make it a true, modified open rule. As the distinguished chairman of the Committee on Financial Services pointed out yesterday at the Rules Committee, he is expecting that consideration of the bill is likely to continue through the end of the week.

But under a normal modified open rule, Members would still be allowed to submit amendments for printing today or tomorrow so that they might be considered tomorrow or Friday. This restrictive rule severely limits the fluidity which traditional and modified open rules allow. This rule is not an open rule as it is currently drafted. It would not even be qualified as a modified open rule. This is a restrictive rule.

Mr. Speaker, I ask unanimous consent that the text of the amendment and extraneous material be printed just before the vote on the previous question.

I also urge Members to oppose the previous question.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.