PrintYesterday the House voted to amend the 34 Act to give regulators the power to veto incentive-based pay packages at institutions with over $1B in assets when they find that the packages would induce excessive risk-taking. The bill also mandates that shareholders of a registered company be given the opportunity to cast advisory votes on the company’s compensation practices.
In most cases, reform efforts have focused on giving more power over executive compensation to shareholders, but this legislation goes further, imposing limits overseen by regulators. In an editorial in the Financial Times, Professor Bebchuk of Harvard Law School supports the proposal on the grounds that these shareholders benefit from explicit and implicit government guarantees, creating a moral hazard that they will be comfortable with more risk than is justified economically and therefore approve incentives that reward excessive risk taing.
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Following are the links to:
- Full text of House Bill 3269
- An article from the New York Times
- An article from Reuters
- Comments by Secretary Geithner
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