SEC Gives Investors a Vote on Executive Pay, Golden Parachutes
byJan 25th 2011 4:52PM
The Securities and Exchange Commission on Tuesday approved a measure that gives institutional shareholders a vote on executive compensation at large corporations, part of regulators' efforts to give investors greater say over top-level salaries that have been described as out of line with companies' performance and employee pay.
Under the Dodd-Frank Act, investors will get to vote on executive compensation at larger companies at least once every three years, starting with the first annual shareholders' meeting held on or after Jan. 21, 2011, the SEC said in a statement. Companies with outstanding stock worth less than $75 million will be subject to the same investor-vote frequency starting in January 2013.
The measure, which was introduced last October, passed the SEC by a 3-2 margin, with Republican commissioners objecting because they say smaller companies should permanently be exempted from the new rule, according to MarketWatch.
The SEC's action appears to be addressing the executive-to-employee pay gap, which has widened by a factor of 10 over the past few decades. Public policy groups have estimated that the average CEO now makes about 300 times their typical worker's salary, up from about 30 times an employee's salary a generation ago.
The new rule also applies to so-called "golden parachutes" -- executive compensation offered in the event of a merger, company acquisitions or transactions involving the corporation going private.