Senator Robert Menendez, a member of the U.S. Senate Banking Committee, introduced legislation last week designed to give public company shareholders an advisory say on executive pay packages. His Corporate Executive Accountability Act of 2010 meshes well with similar legislation passed by the House last summer.
Senator Menendez has put forward numerous reforms to the paradigm that sparked last year’s economic collapse – namely, pay practices that rewarded excessive risk-taking and a widespread short-term focus on immediate corporate profitability. Specifically, Senator Menendez proposes that:
· Public company shareholders be given non-binding votes on whether to approve proposed executive compensation packages;
· Public companies disclose the ratio of compensation levels between top executives and “median” employees;
· Regulators and investors be given the ability to claw back bonuses from executives later found to have been engaged in misconduct;
· Executives fired for cause be disallowed golden parachute payments; and
· Executives be limited to cashing out vested equity compensation to a rate of 20% per year over a five-year period.
Senator Menendez believes that his reform proposals will go a long way toward averting financial crises in the future. He believes that “what everyone has learned all too painfully over the past year and a half is that risky behavior, excesses, and lack of accountability on Wall Street can end up squeezing families on
We support the Senator’s insistence that “corporate executives must be held accountable” and hope that his proposed legislation – along with other legislative efforts – find their way into a comprehensive reform package that truly prevents the re-rooting of what the Senator correctly identifies as “reckless corporate practices.”
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