Yesterday, the White House announced new plans for letting investors have a say in executive compensation. With this proposal, shareholders of all public companies will be able to vote on the pay levels of the companies’ highest paid senior management. This sounds like a better plan than allowing the government to set absolute compensation limits, but while the shareholders would have a vote, they would have no power to enforce the results of the vote. The companies can decide to ignore the shareholders’ wishes, effectively saying, “Thanks for the suggestion; we will get back to you on that. Don’t call us, we’ll call you.”
Additionally, the executive branch named Kenneth Feinberg as “pay czar.” Feinberg will oversee major expenses for companies that received money from the Troubled Asset Relief Program (TARP).
Will the new legislation giving shareholders votes on executive compensation, if passed by Congress, have any effect?