WASHINGTON / CATHERINE COLLINS : Bill Would Give Stockholders More Say in What Top Executives Are Paid

How much is a CEO worth and who decides?

Those issues are at the heart of a companion bill introduced in Congress by Sen. Carl Levin (D-Mich.) and Rep. John Bryant (D-Tex.). The measure would give stockholders a bigger say in the compensation of corporate executives.

“American CEOs are paid 100 times more than the average American worker,” said Levin, chairman of the Senate Subcommittee on Oversight of Government Management. “They are paid two to three times the amount of CEOs in Germany and Japan, and CEO pay increases far outpace company profits.”

Levin argues that the Securities and Exchange Commission is actually hindering stockholder efforts to control runaway executive pay.

“It’s one thing to have spectacular pay for spectacular performance, but another to have spectacular pay for dismal or even mediocre performance,” Levin said. “Shareholders who want to fight pay hikes for poor performance shouldn’t have to battle the federal government as well.”

There is certainly plenty of evidence that executive pay has gone through the roof. A Bryant staff member cited a recent survey that compared CEO pay at the top 365 corporations in 1960 and 1990. According to the survey, the CEOs on average got $190,000 in 1960 and $1.9 million last year. That’s a ten-fold increase. During the same period, the average factory worker’s pay rose from $4,600 to $23,000, about a five-fold increase.

The Corporate Pay Responsibility Act (S 1198 and HR 2522) would remove federal barriers to stockholder efforts to limit executive pay in publicly held corporations through an amendment to the Securities Exchange Act of 1934.

As the law now reads, shareholders who want to have a say in executive pay must invoke the “shareholder proposal rule.” This requires companies to allow shareholders to vote on all shareholder proposals unless the request falls into one of 13 exceptions.

One of those exceptions exempts shareholder proposals on matters “relating to the conduct of ordinary business operations.” The SEC has interpreted this to preclude all shareholder attempts to have a say on executive pay because such matters are part of “ordinary business.”

Levin introduced his bill after a subcommittee hearing at which it was disclosed that the SEC had permitted corporations to prevent shareholder votes on executive pay at annual meetings in 15 cases submitted to the agency.

The companion measures are headed for hearings in both the House and Senate in what is expected to be a long process before a definitive vote occurs on the issue.

Air Bag Requirement Makes Steady Progress

The highway reauthorization bill, which recently passed the Senate, includes an amendment that would require the installation of driver and front-seat passenger air bags in all passenger cars sold in the United States that are manufactured after September, 1995.

The amendment embodied language of the Highway Fatality and Injury Reduction Act, which was first introduced by Sens. Richard Bryan (D-Nev.) John Danforth (R-Mo.), Slade Gorton (R-Wash.) and Brock Adams (D-Wash.).

The bill also requires driver-side air bags in vans, small pickup trucks and jeeps manufactured after September, 1996.

“This legislation will fill a glaring safety gap,” said Bryan, citing a study by the National Highway Traffic Safety Administration that estimated 12,000 lives a year would be saved if all cars had air bags on both sides.

Senate Panel Approves Ban on Hiring Scabs

A bill to prevent employers from hiring permanent replacements for striking workers has passed the Senate Labor Committee.

Labor backs the measure as a way to maintain the delicate balance between workers and management. Management says the issue is as basic as an employer’s right to stay in business in a strike.

The committee voted 10 to 7, with all the Democrats supporting the bill and the Republicans against it. The House Labor and Public Works committees recently approved a similar measure. But the proposal faces a tough battle on the Senate floor because it does not have the full backing of the Democratic leadership. Supporters worry that they lack the votes to prevent a filibuster or override the expected veto from President Bush.

Gephardt Design Plan Loses Some Support

Siding with small business owners and consumers, two congressmen have withdrawn support for House Majority Leader Richard Gephardt’s controversial design protection act, which has pitted the auto industry against independent parts makers and service firms.

The Missouri Democrat’s bill (HR 1790) would protect the designs of car and original-equipment manufacturers for 10 years. It arose out of concern that American product designers for all industries do not have as much legal protection for their work as their foreign counterparts. Proponents argue that leaves U.S. designs vulnerable to cheaper foreign imitations.

Opponents say, however, that the bill would create a monopoly, drive many small companies out of business and increase prices for auto repairs by 30% to 50%.