Washington, DC, United States (AHN) – More teeth have been added to the ongoing global efforts to curb excessive executive compensation and bonuses. Amid plans by European Union regulators to curb bankers’ bonuses, the U.S. Securities and Exchange Commission approved Tuesday new rules that grant stockholders a say on company officials’ salaries, bonuses and retirement packages.
On a 3-2 vote, SEC commissioners allowed shareholders of publicly traded firms to vote at least once a year on executive compensation. However, the vote is non-binding.
Republican commissioners Kathleen Casey and Troy Paredes cast the dissenting votes on the ground that the changes would be too costly for smaller firms.
The new rules, however, won’t be in effect until 2013. It will apply only to companies where stockholders hold less than $75 million of shares. SEC Chairwoman Mary Schapiro said the two-year deferral is sufficient time to ensure the new rules would not unduly burden smaller companies.
The new rules are a result of the Dodd-Frank Act, the regulatory overhaul enacted in July as a response to the 2008 credit crisis. Fat paychecks and compensation packages were blamed for the risky trading that lead to the collapse of major American financial institutions such as Lehman Brothers Holdings and Bear Stearns.
Law experts said that although the shareholders’ vote is non-binding, rejection by investors of executive pay would be big news and be embarrassing to a company’s board, which could prompt the directors to respond to stockholders’ opinion.
The SEC vote came a week after Wall Street paid millions of bankers their 2010 bonuses, even as the rest of the nation copes with the harder times caused by the global financial crisis.
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