Letter To United States Senators, Chris Dodd, and Richard Shelby
U.S. Senator Barack Obama (D-IL) today sent a letter to the Chairman and Ranking Member of the Senate Banking Committee to request that they hold a hearing on the Shareholder Vote on Executive Compensation Act, a bill he sponsored that would give shareholders an advisory vote on executive compensation and spur both increased transparency and public debate over pay packages. The legislation passed the House by a wide margin in April.
The text of the letter is below:
Dear Chairman Dodd and Ranking Member Shelby:
As you may know, in April, I introduced the Shareholder Vote on Executive Compensation Act of 2007 (S. 1181), which is the companion to a bill that passed the House of Representatives by a 269-134 vote.
Since introduction, Senators Harkin, Durbin, Brown, Kerry, and Levin have joined as cosponsors. The legislation was referred to your committee, and I am writing to respectfully request that you hold a hearing on the issue of executive compensation packages, and specifically, the Shareholder Vote on Executive Compensation Act.
S. 1181 would require a nonbinding shareholder vote on executive compensation packages. I believe public discussion and debate over executive compensation packages would force corporate boards to think twice before signing over millions of dollars to CEOs. Certainly, many CEOs are ably steering their firms and deserve their paychecks. But the rate at which executive pay has grown, as compared to stagnating wages among American workers, is rightfully frustrating shareholders and employees alike, especially given the lackluster performance of many of the companies paying these high salaries.
In 2005, the average CEO in the United States earned 262 times the pay of the average worker. Put another way, a CEO earned more in one workday than an average worker earned in a year. In 2005, the average CEO of a Standard & Poor's 500 company received a 16% increase in CEO pay over 2004.
S.1181 neither caps nor limits CEO pay but merely requires that firms discuss and debate pay packages for CEOs on a case-by-case basis with their shareholders. If a board of directors disagrees with the nonbinding vote of shareholders, the board can still go forward with the pay package. But at the very least, shareholders would have had the opportunity to voice their opinions about whether the pay package is appropriate.
Thank you for your consideration and for your leadership in this area. I look forward to working with you on this and other legislation important to America's economy.
United States Senator