Obama Discusses Plan to Give Shareholders a Say in Executive Pay
As CEO salaries skyrocket, Obama calls for passage of his Shareholder Vote on Executive Compensation Act
Prepared remarks included below
Senator Barack Obama will call for swift passage of his legislation to require corporations to hold a nonbinding shareholders vote on compensation packages offered to executives. A new study produced by USA Today found that the top 50 CEOs made around $15.7 million last year - despite the fact that many of their companies have been falling behind.
This isn't just about expressing outrage," Senator Obama said. "It's about changing a system where bad behavior is rewarded - so that we can hold CEOs accountable, and make sure they're acting in a way that's good for their company, good for our economy, and good for America, not just good for themselves. We've seen what happens when CEOs are paid for doing a job no matter how bad a job they're doing. We can't afford to postpone reform any longer. That's why Washington needs to act immediately to pass this legislation."
Obama's bill, the Shareholder Vote on Executive Compensation Act, would restore a measure accountability and restraint to a system that has spun out of control in recent years. The bill would not limit executives' compensation, but rather would ensure that companies disclose and justify the salary and benefit packages offered to executives by give shareholders a nonbinding vote on a company's executive compensation plan.
In 2005, the average CEO earned 262 times the pay of an average worker. That's more in one workday than the average worker earned in one year. Studies and news reports have shown that for many executives even when stock prices and profits fall, pay doesn't, deepening the gulf between the nation's very wealthiest and the hardworking Americans who fuel the economy.
Senator Obama's full remarks follow as prepared for delivery.
Remarks of Senator Barack Obama on Executive Compensation
Friday, April 11, 2008
I'd like to say a few words this morning about the state of our economy. You know, we talk about "issues" in a campaign. But for families across Indiana and the country, the economy is more than a discussion point. That's because the cost of everything from health care, to a tank of gas, to college tuition has shot up while wages have stayed the same. So families are feeling the pinch. On top of that, millions of Americans are also facing foreclosure or seeing the value of their homes decline, and millions more are out of work.
So I wasn't particularly surprised when I read the other day about a poll that shows folks are now more downbeat about their futures than they've been in nearly fifty years.
But we also know that's only half the story - because Wall Street executives have been doing just fine. Some CEOs make more in one day than their workers make in one year. There was a story about this in the paper the other day. They did a study and found that the top 50 CEOs made around $15.7 million last year - despite the fact that many of their companies have been falling behind.
We all believe in that fundamental, American value that if you do good work, if you're successful, you should be rewarded. But if you're a Wall Street CEO today, it doesn't seem to matter whether you're doing a good job or a bad job for your shareholders and workers: You'll be rewarded either way.
Take the home building company, KB Home. They lost nearly $1 billion last year. But their CEO walked away with a $6 million cash bonus, and that's on top of his $1 million base salary. And just the other week, we learned that when Countrywide Financial was sold a few months ago, its top two executives got a combined $19 million. Nevermind that Countrywide is as responsible as anyone for the scandalous mortgage crisis we've got today - a crisis that's the source of many of our other economic problems.
This is an outrage. But as I said in a recent speech at the Cooper Union in New York City, this isn't an accident. It's because of decisions made, not just in boardrooms or trading floors, but in Washington. Under Republican and Democratic Administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practices. We let the special interests put their thumbs on the economic scales, using their clout to rig the game against everyday Americans.
So what we need to do is restore balance to our economy and put in place rules of the road to make competition fair, and open, and honest. One place we can start is by restoring common sense to executive pay.
That's why last year, I proposed legislation that would give shareholders a say on what CEOs are getting paid, and help ensure that companies are disclosing the rationale for the salary and benefits that CEOs are getting. This isn't just about expressing outrage. It's about changing a system where bad behavior is rewarded - so that we can hold CEOs accountable, and make sure they're acting in a way that's good for their company, good for our economy, and good for America, not just good for themselves.
We've seen what happens when CEOs are paid for doing a job no matter how bad a job they're doing. We can't afford to postpone reform any longer. That's why Washington needs to act immediately to pass this legislation.
Now, I know Senator McCain had some sharp words the other day about what some CEOs are getting paid. And I was glad to hear it. But when he's had the chance to do something about this problem, he's opted for continuing the do-nothing approach of the Bush years. And this seems to be a trend with Senator McCain. Yesterday, he finally proposed some steps to deal with our housing crisis. And I'm glad he's moving in the right direction, but what he's proposing isn't enough to really help struggling families.
So I respect John McCain. He'll be a worthy opponent. But we can't afford another four years of policies that don't make a difference in the lives of ordinary Americans, and that's what John McCain is offering.
We need a President who understands the fundamental truth that's been at the heart of America's economic success - that each American does better when all Americans do better; that the well-being of American business and the American people are aligned. That's the kind of leadership the American people deserve. And that's the kind of leadership I intend to offer as President.