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The head of the House of Representatives Financial Services Committee introduced legislation recently to give shareholders at public companies a say in how their top executives are compensated. The proposal by Representative Barney Frank, D-Mass., and 21 other Democrats provides for a vote on compensation awarded in the prior year to a company’s five most highly paid executives. However, because the ballot would be nonbinding, managers are unlikely to lose compensation in the event investors opposed their pay packages. Nevertheless, the bill gives investors some voice as companies prepare for the spring annual meetings season, during which executive pay is guaranteed to be an issue with shareholders. Frank said the bill would ensure that shareholders have “a say on their company’s executive compensation disclosures, without micromanaging the business.” He unsuccessfully pushed similar legislation last year when his party was in the minority. But now as committee chairman, he has made executive pay a legislative priority. The earlier legislation, introduced by Frank in November 2005 as the Protection Against Executive Compensation Abuse Act, would have required companies to hold a shareholder vote to approve its compensation plans. The new legislation, dubbed the Shareholder Vote on Executive Compensation Act, makes clear that the vote wouldn’t be binding.

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