House backs executive pay limit
Members voted 237-185 to institute restrictions. The bill, largely opposed by the GOP, goes to the Senate.
WASHINGTON - Responding to public furor over bonuses paid to executives of Wall Street firms that taxpayers bailed out, the House voted yesterday to slap restrictions on how such executives are paid.
The largely party-line, 237-185 vote sent the Corporate and Financial Institution Compensation Fairness bill to the Senate, which is expected to take up executive pay this autumn as part of broader financial regulatory legislation that President Obama seeks.
The House voted a day after a report from the New York state attorney general said nine banks that took government bailout money since last September rewarded thousands of their employees with bonuses topping $1 million each.
"If the last year has taught us anything, it's that the compensation practices of some of our largest corporations have gotten completely out of control," Rep. James P. McGovern (D., Mass.) said after the vote.
Rep. Pete Sessions of Texas, in a comment that fellow Republicans echoed, assailed the measure as "unprecedented government intervention in the free-enterprise system."
"This bill," said Rep. Peter J. Roskam (R., Ill.), "is an invitation for political meddling at its worst in the private confines of companies that are trying to work hard to create jobs."
Although the bill does not give Obama exactly what he wanted, it advances the first piece of his broader proposal to increase oversight of financial institutions.
The House bill includes Obama's suggestions to give shareholders a nonbinding vote on compensation packages and prohibit directors on compensation committees from having financial ties to the company and its executives.
But the bill goes farther than Obama wanted by prohibiting pay incentives that encourage employees to take financial risks that could threaten the economy or viability of the institution.
"What this bill explicitly aims at is this practice where people are given bonuses if the gamble pays off, but don't lose anything if it doesn't," said Rep. Barney Frank (D., Mass.), chairman of the House Financial Services Committee and the bill's chief author.
If a bet goes wrong, "the company loses money and the economy may suffer, but the decision-makers do not," he said.
The House took the action as lawmakers prepare to leave for summer recess, eager to show they responded to voter anger over bonuses paid to American International Group Inc. employees after the government rescued the insurance giant.
In another example, cited in Thursday's report from the New York attorney general, Citigroup, which received $45 billion in federal money, gave 738 employees bonuses of at least $1 million each, even after it lost $18.7 billion last year.
The National Association of Manufacturers, which along with the U.S. Chamber of Commerce and Business Roundtable opposed the legislation, said it would be "excessively burdensome and disruptive to companies at a time when they are facing significant economic challenges."