Section 951 of the Dodd Financial Reform bill imposes a so-called say on pay rule on not just Wall Street but also Main Street firms, creating a new Securities Exchange Act section 14A:
Any proxy or consent or authorization for an annual or other meeting of the shareholders occurring after the end of the 6-month period beginning on the date of enactment of this section, for which the proxy solicitation rules of the Commission require compensation disclosure, shall include a separate resolution subject to shareholder vote to approve the compensation of executives ....
It could be worse. The bill makes clear that the vote is advisory and does not create new fiduciary duties. (But see the following post.)
Even so, say on pay is a bad idea. Imposing it at the federal level compounds the problem.
My essay Is Say on Pay Justified? examines three premises fundamental to the 'Say on Pay' movement: that current executive compensation is unjustifiably high, that federal legislation is required to address that high compensation, and that federal legislation would be effective in this aim. The paper finds that all three claims are problematic.
Instead of quoting extensively therefrom (just go read it), let's go to the videotape:
