[Congressional Record Volume 153, Number 62 (Wednesday, April 18, 2007)]
[House]
[Pages H3499-H3506]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PROVIDING FOR CONSIDERATION OF H.R. 1257, SHAREHOLDER VOTE ON EXECUTIVE
COMPENSATION ACT
Mr. McGOVERN. Mr. Speaker, by direction of the Committee on Rules, I
call up House Resolution 301 and ask for its immediate consideration.
The Clerk read the resolution, as follows:
H. Res. 301
Resolved, That at any time after the adoption of this
resolution the Speaker may, pursuant to clause 2(b) of rule
XVIII, declare the House resolved into the Committee of the
Whole House on the state of the Union for consideration of
the bill (H.R. 1257) to amend the Securities Exchange Act of
1934 to provide shareholders with an advisory vote on
executive compensation. The first reading of the bill shall
be dispensed with. All points of order against consideration
of the bill are waived except those arising under clause 9 or
10 of rule XXI. General debate shall be confined to the bill
and shall not exceed one hour equally divided and controlled
by the chairman and ranking minority member of the Committee
on Financial Services. After general debate the bill shall be
considered for amendment under the five-minute rule. It shall
be in order to consider as an original bill for the purpose
of amendment under the five-minute rule the amendment in the
nature of a substitute recommended by the Committee on
Financial Services now printed in the bill. The committee
amendment in the nature of a substitute shall be considered
as read. Notwithstanding clause 11 of rule XVIII, no
amendment to the committee amendment in the nature of a
substitute shall be in order except those printed in the
portion of the Congressional Record designated for that
purpose in clause 8 of rule XVIII in a daily issue dated
April 17, 2007, or earlier and except pro forma amendments
for the purpose of debate. Each amendment so printed may be
offered only by the Member who caused it to be printed or his
designee and shall be considered as read. At the conclusion
of consideration of the bill for amendment the Committee
shall rise and report the bill to the House with such
amendments as may have been adopted. Any Member may demand a
separate vote in the House on any amendment adopted in the
Committee of the Whole to the bill or to the committee
amendment in the nature of a substitute. The previous
question shall be considered as ordered on the bill and
amendments thereto to final passage without intervening
motion except one motion to recommit with or without
instructions.
Sec. 2. During consideration in the House of H.R. 1257
pursuant to this resolution, notwithstanding the operation of
the previous question, the Chair may postpone further
consideration of the bill to such time as may be designated
by the Speaker.
The SPEAKER pro tempore. The gentleman from Massachusetts (Mr.
McGovern) is recognized for 1 hour.
{time} 1220
General Leave
Mr. McGOVERN. Mr. Speaker, I ask unanimous consent that all Members
be given 5 legislative days in which to revise and extend their remarks
on House Resolution 301.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, for the purpose of debate only, I yield the customary 30
minutes to the gentleman from Texas (Mr. Sessions). All time yielded
during consideration of the rule is for debate only.
Mr. Speaker, H. Res. 301 is an open rule with a preprinting
requirement providing for the consideration of H.R.
[[Page H3500]]
1257, the Shareholder Vote on Executive Compensation Act. The rule
provides 1 hour of general debate, controlled by the Committee on
Financial Services. The rule waives all points of order against
consideration of the bill except clauses 9 and 10 of rule XXI. The rule
makes in order the Committee on Financial Services amendment in the
nature of a substitute as an original bill for the purpose of
amendment, which shall be considered as read. The rule requires that
any amendments to the bill must be preprinted in the Congressional
Record on or before Tuesday, April 17, 2007. Finally, the rule provides
one motion to recommit, with or without instructions.
Mr. Speaker, I rise today in support of this open rule. This is a
good, appropriate rule that allows any germane amendment to be debated
and voted on by this body, as long as that amendment was preprinted in
the Congressional Record. This rule is appropriate because it allows
for real debate and for up or down votes on matters related to this
bill. I believe this is a good process, and I want to commend both
Chairman Frank and Ranking Member Bachus for requesting this rule and
for testifying in support of this rule in the Rules Committee
yesterday.
I also rise in support of the underlying legislation. The purpose of
this bill is straightforward. H.R. 1257, the Shareholder Vote on
Executive Compensation Act, allows for shareholders of a publicly
traded corporation to conduct annual nonbinding advisory votes on the
compensation of the corporation's executives. Basically, this bill
would allow the shareholders, those with the most vested interests, to
express their approval or disapproval of a company's compensation
practices.
Let me be clear. This bill does not force a company to accede to the
vote, nor does it overrule a decision by the board of directors of a
corporation. Instead, it allows the shareholders to demonstrate their
public approval or disapproval of a corporation's compensation
practices. The bill does not allow shareholders to set caps on the size
or nature of executive compensation.
By allowing for an annual vote by shareholders, H.R. 1257 goes one
step beyond the recently enacted regulation by the Securities and
Exchange Commission, which only requires that the amount in executive
compensation be disclosed.
Mr. Speaker, this legislation would require public companies to
include this nonbinding shareholder vote in their annual proxy
statement to shareholders. An additional nonbinding advisory would also
be provided to shareholders if the company awards a new compensation
package while simultaneously negotiating the purchase or sale of the
company.
By taking this step, H.R. 1257 increases accountability, and also
enables the SEC to better monitor the executive compensation practices
of corporations. I hope that my former colleague from California, Chris
Cox, now the Commissioner of the SEC, feels encouraged by this
legislation and works toward further protecting shareholder rights.
Over the past year, CEOs of major corporations have received
multimillion-dollar severance packages, despite falling stocks and
market share drops during their tenures. These so-called ``golden
parachutes'' highlight the disparity between shareholders' rights and
executive compensation oversight.
In addition to neglecting shareholders' interests, current executive
compensation practices actually hurt the long-term corporate value of a
company. Unprecedented growth in executive compensation over the past
two decades has taken money out of the pockets of shareholders and
compromised the long-term interests of too many companies.
According to the Corporate Library, in 2006, the average CEO of a
Standard and Poor's 500 company received $14.78 million in
compensation. It is only fair that the shareholders, the people who
actually foot the bill for severance packages, have the opportunity to
express their support or disapproval of their company's executive
compensation.
H.R. 1257 empowers shareholders and complements the SEC's current
regulations regarding executive compensation.
Mr. Speaker, I urge my colleagues to support the rule and the
underlying bill.
Mr. Speaker, I reserve the balance of my time.
Mr. SESSIONS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I rise today in opposition to this rule and to the
underlying legislation, which I think constitutes an unnecessary and
unwarranted Federal intrusion into the free enterprise system and the
private sector. The legislation that the Democrat majority has brought
to the House today would create a new Federal mandate on publicly held
companies, but does so in a half-hearted way that would have absolutely
no practical impact on its purported goal of improving disclosure and
addressing ``excessive'' executive compensation.
The Democrats' Shareholder Vote on Executive Compensation Act would
force every publicly held company to bear the costs of administering a
toothless, nonbinding shareholder vote on pay packages of its highest
compensated officials during every proxy vote. It is unclear, however,
what the outcome of this vote, which under current rules could already
happen today at any publicly held company, would mean for the company,
the board of directors, executives or the shareholders.
Yesterday in the Rules Committee, Chairman Barney Frank testified
that this vote was not intended to create a new fiduciary
responsibility for board members. Even if a majority of shareholders
agreed that a company's executives were being compensated too
generously, there are no provisions in this legislation to obligate a
board to comply with this decision.
So if a board does choose to ignore an affirmative vote, again
according to Chairman Frank's testimony in the Rules Committee, since
there is no fiduciary responsibility and no private right of action
created by this new mandatory shareholder vote, there is no legal
recourse provided in this bill for shareholders to force board
compliance.
So rather than demonstrating the courage of their convictions that
executive pay is wildly out of control in this country and that
shareholders should be able to rein it in unilaterally through a ballot
process, Democrats have chosen to bring legislation to the floor today,
forcing private entities to take an action that they are already
capable of taking by their very own nature. But this would make this
new mandatory vote little more than a weak ``sense of the shareholder''
resolution that can be simply ignored by a board with impunity.
I am also extremely surprised, Mr. Speaker, by the Democrat
leadership's recent conversion to the merits of democracy in
determining an organization's actions. Less than 2 months ago, this
same leadership brought to the floor legislation that strips American
workers of their right to use a secret ballot to decide whether or not
to unionize and provides for unprecedented intimidation of employees by
union bosses under a fundamentally antidemocratic process known as
``card check.'' But I suppose the Democrats' new-found selective
commitment to democratic principles is better late than never.
The reality is that shareholders already have a democratic option
available to them if they think that a board is shirking its fiduciary
responsibilities to investors. They can sell their shares and vote with
their dollars. This is a basic principle of how markets work in a free
enterprise system, and it has been the steadfast commitment to
principles like these that has made the American economy the envy of
the world over the last decade, even while economies across Europe have
stagnated and shrunk.
Mr. Speaker, Mr. Frank has represented to the House that the real aim
of this legislation is not to create a new class of lawsuits for the
trial bar to exploit, and I take him at his word. But that leaves only
one sensible explanation for why the Democrat majority would bring such
a toothless bill to the floor of the House today, and that is to
provide outsiders, such as Big Labor bosses, environmentalists and so-
called ``consumer activists,'' with a new avenue to criticize the
management of corporations and to compel boards to do their bidding.
[[Page H3501]]
{time} 1230
Information about executive compensation is already fully disclosed
to investors, who have every opportunity to determine whether or not it
is too generous before becoming an owner of a listed security. And
under this bill, even if they decide that it is too generous, the
legislation contains no enforcement mechanism. This legislation simply
provides a foot in the door for outside organizations to try to bully
boards of directors in hopes of weakening management and gaining
concessions down the road. This bill does nothing to improve corporate
governance. It does nothing to improve board decision-making or
increase shareholder value. That is why I have submitted an amendment
that would force any person or organization who spends a significant
sum on trying to influence the outcome of this new mandatory vote to
disclose who they are, how much they have spent and on what activities
so that investors can have a full picture of who is trying to influence
them in this decision-making process.
While I think this amendment would improve a misguided bill, I am not
holding my breath at all that the majority party will join me in
standing up for increased transparency. But who knows? Today we learned
that they have radically changed their opinion on the merits of secret
ballots, so perhaps they will stand up for transparency in proxy vote
influence-peddling also.
Mr. Speaker, I oppose this rule and the weak underlying ``sense of
the shareholder'' legislation. Congress can do better than this. And
rather than mimicking the interventionist economic policies of Europe,
I believe we should reject this legislation and stand up for what sets
our economy apart and has spurred our continued economic and job growth
while others sank, which would be a commitment to free markets and an
understanding that when given information, investors can make good
decisions on their own.
Mr. Speaker, I stand up for the free enterprise system and the
American way of doing business.
Mr. Speaker, I reserve the balance of my time.
Mr. McGOVERN. Mr. Speaker, again I would remind my colleagues that
this is an open rule that allowed every Member of this House to be able
to offer an amendment if that Member so desired. In fact, as the
gentleman from Texas pointed out, he himself will be offering an
amendment. And so I think this rule deserves support.
I should point out for the record that when the gentleman's party,
the Republic Party, was in the majority here, that even though I was on
the Rules Committee, routinely Members were denied the right to even
offer their amendments. There were 13 Members who have decided to offer
amendments. Ten of them are Republican. I think this is a fair process
and this rule deserves support.
Having said that, I would like to yield 4 minutes to the
distinguished gentlewoman from Florida (Ms. Castor), a member of the
Rules Committee.
Ms. CASTOR. I thank my distinguished colleague from the Rules
Committee for yielding time.
Mr. Speaker, I urge support of H.R. 1257 to provide a reality check
to the skyrocketing compensation of CEOs of corporations across
America. From 1995 to 2005, average CEO pay increased five times faster
than that of the average worker. The American people understand the
growing disparities in earnings in our country. The average CEO makes
more money before lunch than the average worker earns all year. So
today I urge my colleagues to bring a measure of accountability to the
boardroom by allowing shareholders to voice their opinions in a
meaningful way about the multimillion-dollar paydays of their CEOs.
Last week, one of my hometown newspapers, the St. Petersburg Times,
reported on ``Corporate Paydays That Boggle the Mind.'' They reported
that in one of the richest corporate paydays ever, the CEO of oil
company Occidental Petroleum Corporation received a total compensation
package last year of $416 million. These record profits and paydays at
a time when my neighbors and the American people are paying record
prices at the gas pump highlights the need for a new direction in this
country for energy policy.
Similarly, record profits and paydays at HMO and pharmaceutical
companies raise red flags at a time when patients and doctors and
hospitals have lost control to many of the Bush privatization schemes
in our health care system. The new Democratic Congress passed
legislation fortunately during the first 100 hours to require the
negotiation of the Medicare part D drug price benefit. This is very
important. It's un-American to block the negotiation of fair prices
under Medicare part D.
What I hear from my seniors back home is that they want Medicare part
D to be simpler so that it works for them, so that it works for our
seniors and it works for our taxpayers and not simply benefit the HMOs,
the big drug companies and their CEOs for these large corporate
paydays.
So, Mr. Speaker, I urge support of this rule and this bill to allow
shareholders to send a message about corporate paydays that boggle the
mind and bring a measure of accountability to our American boardrooms.
Mr. SESSIONS. Mr. Speaker, at this time I would like to yield 5
minutes to the ranking member of the Committee on Financial Services,
the gentleman from Alabama (Mr. Bachus).
Mr. BACHUS. Mr. Speaker, I take this opportunity on the rule to
simply clarify what we're debating here today.
Now, we are not debating executive compensation, because the Congress
does not set executive compensation. There have been many examples just
in the past month or two of what we would judge to be outrageous CEO
pay packages. There have been many occasions when our constituents have
said to us, isn't that $200 million going to some executive, isn't that
outrageous? People hear about these pay packages which, quite frankly,
I'm not here to defend. One thing they say is, you know, are the
shareholders being taken advantage of? Are the rank and file being
taken advantage of? And in many cases, the answer is probably ``yes.''
There is no justification for many of these pay packages, these
executive pay packages. Sometimes they are based on performance and
value added to the corporation and to the shareholders and to the
employees, but many times they're not. Many times they're not linked to
performance.
Now, having said that, why would I have said that and then come down
and oppose this legislation? Because, in fact, this is a mandate. This
is Congress beginning to intrude on corporations.
Now, many of my colleagues on the other side would say, this is a
nonbinding resolution. But it is a mandated resolution. If we pass this
resolution, every publicly traded corporation, both large and small,
the shareholders in those corporations must take a position on
corporate executive pay for every top executive. In every case, every
shareholder must vote on every executive and say your compensation is
adequate or it's not. It's not justified.
How many times has this Congress substituted its judgment for the
American people? For people in business? And that is again what we're
doing by telling shareholders you must have this vote. This is a
mandate.
Now, there is another reason that we ought to oppose this. Congress
should never rush in and begin to change the free enterprise system,
our system of competition between companies. What we have required
through the SEC in the last year and we just now mandated this and to
come back now with something more intrusive until we see that it works
is our instruction and the SEC's instruction to public corporations
that you must publish the pay, the salary, the compensation, the perks,
the benefits that you give your top corporate executives.
{time} 1240
And the reason we did that is, once that's published and shareholders
know exactly what these top executives are doing, shareholders have the
right today. And today they can bring a motion before the corporation,
and if the majority of shareholders agree, they can take a position on
executive compensation.
Now, that is not something we oppose, and in many cases these
corporations are doing it. Morgan Stanley, just last week, the
shareholders came forward with a proposal the shareholders took to do
exactly what this
[[Page H3502]]
resolution wants to do. And guess what? The shareholders at Morgan
Stanley said ``no''; the majority of shareholders said ``no,'' we are
not going to get involved in something that might affect the excellent
performance of this company, of this corporation.
We have had a system of corporate governance that is second to none
in the world. It has made us the leader in the free world. It has
evolved over centuries. It has involved over decades. It is part of our
statutes.
Let me say this. The gentleman from Mississippi, the gentlelady from
Florida, you have come up and you have said, look at some of these
outrageous pay packages. I agree with you, I agree with you. I have
picked up the paper. I have said, what is going on here.
But let me say, on many occasions I have picked up the paper a month
later and seen where shareholders acted to address these issues. But
let me say this, how many times have we been approached by constituents
and we have said, well, when that law was passed, we didn't intend to
do this, it wasn't our intention to do this. Unintended consequences.
Let me tell you something. When Congress becomes a second-guesser and
a judge of executive pay for every corporation in America, every public
corporation, ladies and gentlemen, we are getting on a slippery slope.
Mr. McGOVERN. Mr. Speaker, at this time I would like to yield 10
minutes to the gentleman from Massachusetts, the distinguished chairman
of the Financial Services Committee (Mr. Frank).
Mr. FRANK of Massachusetts. I thank the gentleman and the Rules
Committee for bringing forward an open rule.
I often disagree with my colleagues on the other side, but I have
rarely before been as baffled by the illogic of their argument as I am
today. I do not recall the last time I heard such a hodgepodge of
inconsistency and inaccuracy.
This is a bill that has been condemned for being, A, bullying and
intrusive, and B, toothless. The toothless bully is, I guess, a new
concept. In fact, let me begin with this denigration of the notion of
nonbinding resolution.
The gentleman from Texas kind of slipped, I think, when he said ``the
sense of shareholder resolution.'' In fact, we spend much of our time
passing nonbinding resolutions. Members who think nonbinding
resolutions are a waste of time probably should just show up on
Wednesday because that is all we do generally on Mondays and Tuesdays,
although we are doing more since we have taken over.
But let's get to more of the substantive mistakes. My friend from
Alabama said we would be second-guessing every corporate salary. Of
course not. That isn't even remotely close to being even partially
true. We have deliberately said it is not our job to say what the
salary should be. We are empowering the shareholders to voice their
opinion.
Now, I will acknowledge at the outset, if a board of directors sees a
vote and the majority of the shareholders vote ``no'' and they decide
to vote ``yes,'' the board has that right. I doubt that the board would
do that much. In fact, I would not impute to the boards of directors
what my colleagues impute to them, a contempt for the views of
shareholders. There may be individual cases where shareholders didn't
understand certain things, new events may have intervened. But, no, I
do not believe that as a general rule people on the board of directors
will ignore shareholders.
And by the way, we are talking about the shareholders, and I know the
gentleman from Texas said they are outsiders, they are activists, as
loathsome a word as the rules of the House will allow as he would use
it. They own shares. They are the owners of the companies. What a
denigration of the people who are in other contexts the fountain of all
wisdom. We are told the market is, after all, the best source of
wisdom.
The former majority leader from Texas used to say, governments are
dumb; markets are smart, markets work well. Well, who is the market?
The market consists of the people who own the shares in this case. How
did they become so dumb when it comes to deciding how to pay for the
people that work for them?
And we are told, okay, if they don't like it, they can sell their
shares. What a concept of ownership. I mean, these are the people, many
of them who are outraged at the eminent domain issue. What they are
saying is, if you have owned shares in a company for a while, you have
made your decision that this is the best way to diversify your
portfolio, and then some board makes a decision with which you
disagree, that you think may hurt the company, sell your shares. What
kind of a denigration of the notion of ownership is that?
There are, of course, people who will tell you, wait a minute, what
if I believe when Home Depot, for instance, did what it did with
Nardelli, it had a very negative effect on people's perception of the
company. One of the very decisions you disagreed with led to a drop in
the value of the shares because the market said, why did they do that.
Should you then sell your shares and be forced to take a loss or take
corrective action and restore the value to your shares? That is what we
are talking about. It is very simple.
And then the oddest one of all is, how dare we interfere with
corporations? Corporations are artificial creations of positive law.
God made no corporations. No corporations evolved. I will be neutral on
that subject. Corporations exist because the law of a jurisdiction
creates them. It creates them to give them certain advantages, certain
immunities, et cetera.
Of course, the government tells corporations what the rules are. This
notion that we are interfering with corporations is nonsensical. They
exist according to positive law. And the law says, you must do this,
you may not do that. That is what corporations are.
And now the gentleman will say, oh, well, look what the SEC did, we
don't have to get involved. What the Securities and Exchange Commission
did was very intrusive. And the gentleman said, well, the corporation
can do that if they want to; they could have published the salaries if
they wanted to. The Securities and Exchange Commission said, we mandate
you to print these salaries.
And by the way, to the extent that there is an expense, it is much
more in what the SEC did than in what we did. CBO has concurred, there
is zero, maybe 8 cents expense here. The SEC has already mandated that
the corporations print in the proxy form all this information. We
mandate that they add a box, ``yes or no.''
And then my friend from Alabama, great civil libertarian, but on this
one I think he may have gotten a little too extreme in his civil
libertarian zeal, he said, we are making the shareholders vote. It
sounded like he said we are standing over those poor shareholders with
a whip and making them vote. Well, in the first place, we are not.
Abstention remains an option for shareholders.
Secondly, the argument is, well, they already have that right, some
of them. No, they don't in every case. There are corporations that have
refused to allow it. AT&T was just ordered by the Securities and
Exchange Commission to allow this procedure, but it was a case-by-case
issue. It is not a general rule. So the SEC that you defend just
ordered AT&T to do this, they just intruded, as is their right; but
there is not a general principle.
Shareholders do not have a right to have this vote on executive
compensation. And this bill simply says, the people who own the company
take what the SEC has mandated they put forward, has a right to vote on
it. Now we are told, and the gentleman from Texas, in a stirring
peroration, said he stood for truth, justice, the American way, et
cetera; and said, let's reject the European effort.
Well, this is not a general European practice, it is a practice in
England, what we are talking about. There is a committee that is known
as the Paulson Committee, because it was inspired by Secretary of the
Treasury Paulson, chaired by Professor Scott of Harvard. There was the
McKenzie report, done by Mayor Bloomberg, strongly supported by the
Chamber of Commerce and all the financial groups. They have said to us,
can't you guys be more like England in your regulation of corporations?
Listen to the debate going on right now over relations of
corporations in America. We are being told that the
[[Page H3503]]
model is the British model, the Financial Services authority. This is
Secretary Paulson's committee that said it, this is the Chamber of
Commerce.
Yes, the English do do this, it is not a big continental thing. But
if, in fact, you think we should be very careful never to do anything
because the English are doing it, then where is the repudiation of the
McKenzie report and the Paulson Committee report which have urged the
SEC to follow the model of Financial Services.
{time} 1250
In fact, it is very straightforward. Here is the problem. Why do
normally coherent Members talk in less than coherent form about this,
making contradictory arguments, ignoring reality?
Here is the deal. My friend from Alabama said, I am not here to
defend CEO salaries. But in fact he is, because what this bill says is,
the shareholders, not the outsiders, not those evil activists, not
those lurking labor agitators, people who own shares. And, by the way,
this is strongly supported by the leaders of institutional
shareholders, large pension funds, The Corporate Library. Shareholder
groups are in favor of this. And it says that people who own the shares
should be able to vote in an advisory capacity on whether they think
the compensation is too much or too little.
Now, the fact is that the gentleman from Alabama said there have been
outrageous examples of excessive compensation. It is going up in
general to the point where it is a record problem, and he says he is
not here to defend them. He is not here to defend them verbally, he is
just here to defend them parliamentarily, because if this bill dies,
then they are totally unimpeded. And Members have said, don't rush in.
Well, these salaries have been going up for a long time, and this is a
long-time trend. So if not this, what do you do? It is true, the SEC
went to the limits of its power.
Mr. BACHUS. Mr. Speaker, will the gentleman yield?
Mr. FRANK of Massachusetts. I yield to the gentleman from Alabama.
Mr. BACHUS. Let me clarify something. I believe, in addressing the
Speaker, and I respect the chairman, you have allowed debate on this,
you have been very gracious. But I believe that in addressing the
Speaker, you mentioned that we passed nonbinding resolutions all the
time.
Mr. FRANK of Massachusetts. In the House. Yes, sir.
Mr. BACHUS. And that this was a nonbinding resolution.
But I believe this actually is not a nonbinding resolution.
Mr. FRANK of Massachusetts. The gentleman misunderstands my point,
and I will correct it. I am taking back my time. I was not referring to
the gentleman's de facto defense of the salary; I was referring to the
gentleman from Texas' statement.
He denigrated the product of this legislation because it would
produce a nonbinding resolution. In fact, he sneered at it as a sense
of the stockholder, sense of the shareholder resolution. And my point
was aimed at his argument that the notion of a sense of the resolution
is meaningless would invalidate a lot of what we do. So that is the
issue I was making.
Let me just say in closing, Members on the other side sometimes get
separation anxiety when they are forced to differentiate themselves
from particular corporate abuses. They brought themselves to do it with
Sarbanes-Oxley, but they are having in various ways buyer's remorse
there, I think excessive buyer's remorse.
Members say we don't like corporate excesses, but we can't do
anything about it.
Well, no, Congress should not substitute its judgment for the market,
Congress should not set the salaries. What Congress can do is to
empower the shareholders who own the companies to express their
opinion. It is not a right that the shareholders uniformly have now. It
is Congress in exercise of the legislative power to set the rules for
corporations, which is inherent in the nature of corporations saying
that on this one issue; and by the way, one reason for singling them
out is, there is reason to believe that the relationship between the
boards of directors and CEOs is not sufficiently arm's length for the
decision to be left entirely to the board without input.
It doesn't mean you take the decision away from the board elsewhere.
It simply says there have been excesses in corporation compensation, we
think it would be helpful if the shareholders could give an advisory
vote.
There is really no good argument against it, and that is why we have
heard arguments against that aren't very good, that aren't very
logical, that aren't based in reality. That is all we are voting on.
And in the absence of this bill, Members can then take credit for
continuing to enable salaries paid to the top executives to go up and
up and up. And if you are a shareholder of a corporation and you think
that is a mistake and you think that is damaging, you have the option,
we are told, of selling your shares at a loss, of being excluded from
an investment decision that you think is in your interest. That is not
acceptable.
Mr. SESSIONS. Mr. Speaker, I do appreciate the gentleman from
Massachusetts speaking so clearly about what is happening. I would
clarify my words and say to the gentleman, I do believe that it would
be appropriate to have anyone who is attempting to influence an outcome
of a vote, that they should have a requirement upon them to identify
themselves, to state how much money they are spending and the
activities that they are engaged in. And I think that that is full
disclosure also about the activities that could take place under this
new nonbinding resolution that we are attempting to pass.
Mr. Speaker, at this time, I would yield 5 minutes to the ranking
member of the Rules Committee, the gentleman from San Dimas, California
(Mr. Dreier).
Mr. DREIER. Mr. Speaker, I thank my friend from Dallas and thank him
for his superb management of this rule on our side.
As I listen to the arguments propounded by my colleagues on the other
side of the aisle, including the distinguished Chair of the committee,
the conclusion that I have drawn here is, we have here a solution that
is really looking for a problem.
I continue to hear great praise for the action that our former
colleague Chris Cox, the now chairman of the Securities and Exchange
Commission, has taken in doing something that we regularly called for
in this institution when it comes to our work here: transparency,
disclosure, and accountability.
Under this regulation that has been promulgated by the Securities and
Exchange Commission, it calls for full disclosure of the compensation
packages for the top five executives. What it means is, we are
empowering shareholders and any other interested party with more
information, with a better understanding of what it is that we are
trying to deal with here.
So why now, after the Securities and Exchange Commission has done
what the chairman of the Financial Services Committee, Mr. Frank, has
just said is actually going beyond what it is that we are doing, why do
we need to take action here in this institution on this issue?
Now, while I know that my friend from Massachusetts and my friend
from Alabama, the distinguished chairman of the committee and the
ranking member, had this exchange on nonbinding resolutions and the
impact that this might have, I think most have concluded that there is
a very deleterious potential impact that this legislation could have;
and that is, it quite possibly will dramatically enhance the number of
potentially frivolous lawsuits being brought forward by shareholders.
Now, I find that very troubling in light of the fact that we have in
a bipartisan way in the past been able to pass legislation which has
been trying to focus on the tremendous cost burden that is imposed on
the American consumers, shareholders, taxpayers, all the way across the
board, with the number of frivolous lawsuits that we have seen. And,
again, we want very much to see the market run its course on this
issue.
I think that this is bad legislation. I think it is poorly crafted.
And I think, again, based on the action that the Securities and
Exchange Commission has taken, let's see how that works. Let's let it
go into place. Let's let the entity
[[Page H3504]]
which has responsibility for this deal with it, see them work and see
this information come forward, and see if we still have what is seen by
many to be a problem.
I also argue that as we look at these compensation packages that have
existed, and there are a heck of a lot more than any of us in this body
make, that is for darn sure, but the fact of the matter is, these are
decisions that boards of directors make. And one of the precious rights
that we have as American citizens is the right not to own a stock.
There is no one that I know on the face of the Earth who is compelled
to purchase a share of stock, and I think that the right not to own a
stock is a precious one.
And, you know, if I don't like the decision that the CEO of a company
that I own a stock in or that the board of directors of that company
makes, you know what, I will sell that stock. And I am happy to sell
that stock, and that is my right to do it. If I don't like the decision
that a board of directors has made, a decision that a board of
directors has made when it comes to compensation for their executives,
if that really is driving me and I am convinced that the stock should
be much higher, I will sell it. So I believe that it is a real mistake
for us to make this kind of overreach.
And, Mr. Speaker, I also have to say that I am very troubled with
what we are seeing here now as the new definition for rules that have
come forward. Now, I entered into the Record of the Rules Committee
last evening back to the 103rd Congress when our distinguished former
colleague, Joe Moakley, was chairman of the committee and he had in his
survey of activities of the Rules Committee the definition of rules.
This rule that has come forward is defined as an open rule with a
preprinting requirement, but, Mr. Speaker, it is much more than that.
{time} 1300
Traditionally, an open rule that has a preprinting requirement has
been known under Democratic and Republican Congresses as a modified
open rule. Our colleagues, in their quest to say that they have had
more and more open rules, have redefined what an open rule is, but the
thing that troubles me is not just that they have done that. But they,
by passage of this rule, have actually prevented Members of Congress
from being able to participate in this under an open amendment process.
Why? The majority leader has apparently announced that we are going
today to begin consideration of this shareholder bill, and then we are
going to consider it on Friday. So what it means is, as we proceed with
the amendment process today, Mr. Speaker, unfortunately what we are
doing is we are saying to Members of the House of Representatives who
want to amend this bill on Friday that any amendment that they might be
offering had to have been printed in the Congressional Record last
night, 3 days before the measure is considered on the floor, and they
are trying to define that as an open amendment process.
Mr. Speaker, if it looks like a duck and walks like a duck and talks
like a duck, it is a duck. And you know what? This is not an open rule.
I urge my colleagues to oppose the rule and to oppose the underlying
legislation.
Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, let me first of all say that I apologize to the
gentleman from California, the former distinguished chairman of the
Rules Committee, for this open rule. I guess he is upset that 13
Members have decided to offer amendments. They have known about this
bill, by the way, for close to 3 weeks. So 13 Members, 10 of them
Republican, have decided to put forward amendments that will be debated
and considered on this floor, including the distinguished gentleman
from Texas (Mr. Sessions).
I do not know whether the gentleman from California wants me to
apologize to Mr. Sessions and the other Republicans for allowing their
amendments to be made in order, but the bottom line is, what we are
trying to do is break the trend that existed in the Rules Committee
when they were in charge, which is that nobody would be allowed to
offer amendments on the floor.
One of the things that this leadership has promised is a more open
process, a process that is more fair, and that is what we are trying to
do today. There are 13 amendments that have been pre-filed. They will
all be considered on the floor unless the people who printed those
amendments do not want to offer them. That is a fair process.
As somebody who sat on the Rules Committee for many years and who
routinely saw closed rules reported under that committee with not a
peep from anybody on that side, it is a little bit hard to digest this
whining over an open process. I guess my colleagues on the other side
of the aisle object to the fact that Members should have a right to
read an amendment that they are going to vote on. I can understand that
because they would routinely bring huge bills, hundreds of pages in
length, to the floor without giving anybody in this Chamber the
opportunity to read them. Those practices hopefully are over for good.
This is a fair rule. This is an open rule, and I urge my colleagues
to support it.
At this point, let me inquire from the gentleman from Texas whether
or not he has any additional speakers, because at this point, I am the
last one on this side.
Mr. SESSIONS. Mr. Speaker, I thank the gentleman for the inquiry. At
this time, we have one additional speaker.
Mr. McGOVERN. I would let the gentleman proceed, and I reserve the
balance of my time.
Mr. SESSIONS. Mr. Speaker, I yield 4 minutes to the gentleman from
Georgia (Mr. Price).
Mr. PRICE of Georgia. Mr. Speaker, I thank my good friend from Texas
for yielding and for his leadership on this issue.
I would like to just comment about both the rule and the bill; and,
Mr. Speaker, I come to the floor today to just tell you that Orwellian
democracy continues to be alive and well here in the House Chamber.
Our good friends on the other side of the aisle seem to think that,
if they just say something, that it is, that their action does not make
any difference. This is the open rule that is not. That is what this
is.
Because what we have, as my good friend from California described, is
in fact a modified open rule. What has occurred with this rule is that
there is a requirement for pre-filing amendments to this bill, and in
fact, the pre-filing had to occur about 72 hours before the final
portion of the bill will be voted upon. That is not an open rule, Mr.
Speaker.
An open rule is when the bill comes to the floor and anybody who has
an idea and wants to offer an amendment is allowed to offer an
amendment. Why is that important? Well, that is important because each
of us represents a certain number of constituents around this Nation,
and at some point, each of us may have a better idea about how the bill
ought to progress through the process.
But right now, what has happened is, unless we had that idea 2 days
ago, yesterday, then it is not able to be entertained. So this is not
an open rule.
I would ask my friends in the majority party: What are you afraid of?
What are you afraid of? What amendment is it that you are afraid of
that might be brought to the floor that is so dangerous to the American
people that you do not want to even talk about it? That is what I would
ask.
Mr. Speaker, my good friend from Massachusetts says that he thinks it
is important for people to be able to read amendments and read bills.
Well, we do, too, but that is provided for in the rules. That is
provided for in the rules. This rule does not address that. The fact
that somebody might bring an amendment to the floor under a truly open
rule would not affect that at all.
So he also asked whether he should apologize to the gentleman from
California for having what he described as on open rule. No, Mr.
Speaker, I would suggest that he apologize to the American people for
not carrying out the responsibility of democracy in this Chamber.
So this is not an open rule. This is the open rule that was not, and
it is important for the American people to appreciate that.
I do want to mention a couple of items about the merits of the bill
itself. We all had an opportunity to be home for the past 2 weeks. This
was
[[Page H3505]]
one issue that constituents in my district wanted to talk about. They
wanted to talk about whether or not it was appropriate for Washington
to insert itself into the compensation for CEOs in this Nation.
Many people, I being one of them, are confused and concerned about
some of the compensation that major CEOs are getting in this Nation,
but everybody in my district appreciates and understands that the place
to solve that problem is not Washington, DC. In fact, that is the last
place that you want this problem to be solved because Washington, DC,
cannot respond in a nimble enough fashion to be able to do so. In fact,
there will be significant, unintended consequences, I would suggest,
Mr. Speaker.
As you know, the challenges that all businesses have across this
Nation are encumbered by the taxation that they are required to pay by
the exposure to litigation and, yes, Mr. Speaker, by the regulations
that come down from on high, and this will be another regulation. So
what the majority party is doing is saying to our businesses across
this Nation, our public companies across this Nation is, you have got
another reason to go offshore; you have got another reason to take
American jobs and remove them because we are going to make it too
difficult for you to engage in your business here in America.
In fact, Mr. Speaker, what they are going to do is to make it so
difficult for many businesses with their onerous regulations that not
only will individuals take their businesses offshore, many of them will
say it is just too much of a challenge to comply with all of your
ridiculous regulations, so we will go private so that Americans all
across this Nation will be precluded from participating in a greater
way in the American Dream.
Mr. Speaker, this rule is a bad idea. The bill is a bad idea.
Washington cannot solve this problem. You know that, and I urge my
colleagues to oppose both.
Mr. McGOVERN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, if the gentleman from Georgia thinks this rule is such a
bad idea, I hope that maybe he might reconsider offering the three
amendments that he has pre-filed.
Let me just say for the record, because I think it is important to
state this, the gentleman from Georgia just went on a rant, and in the
previous Congress when his party was in control, in the entire Congress
there was one open rule that was not an appropriation bill, one, and I
do not recall a single instance when the gentleman from Georgia ever
came to the floor and complained about that. I do not recall a single
instance when the gentleman from Georgia or, quite frankly, anybody on
the other side came to the floor and objected when the Republican-
controlled Rules Committee waived the requirement that Members have 3
days to be able to read a report before a bill was considered.
{time} 1310
I don't remember a single instance when the gentleman from Georgia,
or, quite frankly, anybody who we have heard complain today, ever came
on the House floor and voted against a closed rule. They ran this place
under the most restrictive closed process in the history of this
Congress.
I think that needs to be said for the record because it goes to the
point that I was making earlier that I don't understand what all the
complaints are about. You have every Member who wanted to offer an
amendment to this bill given the opportunity to do so.
They knew that this bill was coming 3 weeks in advance. They could
have thought about it for 3 weeks, they could have instructed their
staff during that period of 3 weeks to come up with something.
Obviously, a number of people did, including the gentleman from
Georgia, who has three amendments we are going to have to listen to.
Let me again urge my colleagues to support this rule. It is a fair
rule. It is an open rule.
I am sorry if they don't like the fact that Members ought to have an
opportunity to read amendments and read bills before they are voted on,
but I think that is a fair thing to do. Of course, when they were in
charge, they would routinely waive that right. But, you know, we will
respect that.
Mr. Speaker, I reserve the balance of my time and would ask the
gentleman from Texas if he has any additional speakers.
Mr. SESSIONS. In response to the gentleman at this time, I do not
have any additional speakers. I would use this time for my close. I
thank the gentleman for the inquiry.
Mr. Speaker, I think the point that would be taken here would follow
those words that David Dreier spoke on, and that is, we simply call
things what they are honestly. We don't try to call things what they
aren't. We follow the regular order of this House, as has been
established, going back at least to the 103rd Congress when Mr.
Moakley, the chairman of the Rules Committee, said, this is what we
will call things, this is what an open rule is, this is what a modified
rule is. That is the point we are trying to make today, that you should
call something what it is.
At this time, I would like to include a statement of administration
policy on this bill.
Statement of Administration Policy--H.R. 1257--Shareholder Vote on
Executive Compensation Act of 2007
(representative frank (d) massachusetts and 27 cosponsors)
The Administration opposes H.R. 1257, which would require
public companies to hold a separate advisory shareholder vote
to approve the compensation of executives. The Administration
does not believe that Congress should mandate the process by
which executive compensation is approved.
The Administration supports full transparency to
shareholders regarding executive compensation decisions.
Recent enhancements in corporate governance and disclosure
have strengthened the executive compensation decision-making
process of boards of directors. Corporate governance changes
have made boards more independent, including through the
establishment of compensation committees composed solely of
independent directors. In addition, as a result of the
Securities and Exchange Commission's revised disclosure rules
on executive compensation, which recently became effective,
shareholders are receiving comprehensive information on
executive compensation. Before additional corporate
governance requirements are legislated, the Administration
believes that recent enhancements should be given time to
take effect.
The statement of the administration is quite succinct, and that is at
the end of this statement it says ``before additional corporate
governance requirements are legislated, the administration believes
that the recent enhancements should be given time to take effect. That
is in reference to the SEC and what the SEC had done.
Mr. Speaker, I am asking Members to oppose the previous question so
that I may amend the rule to make it a true, modified open rule. As the
distinguished chairman of the Committee on Financial Services pointed
out yesterday at the Rules Committee, he is expecting that
consideration of the bill is likely to continue through the end of the
week.
But under a normal modified open rule, Members would still be allowed
to submit amendments for printing today or tomorrow so that they might
be considered tomorrow or Friday. This restrictive rule severely limits
the fluidity which traditional and modified open rules allow. This rule
is not an open rule as it is currently drafted. It would not even be
qualified as a modified open rule. This is a restrictive rule.
Mr. Speaker, I ask unanimous consent that the text of the amendment
and extraneous material be printed just before the vote on the previous
question.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. SESSIONS. I also urge Members to oppose the previous question.
Mr. Speaker, I yield back the balance of my time.
Mr. McGOVERN. Mr. Speaker, let me urge all my colleagues to support
the rule and to also support the underlying bill. H.R. 1257 is a good
bill. If you want to defend the status quo, then vote against it. But
if you want more accountability, more transparency, then vote for it.
This should not be a partisan issue, and I hope that it would get a
strong bipartisan vote on passage.
Let me again urge my colleagues to support the rule, and this is a
rule that allows the gentleman from Texas to be able to offer an
amendment. It allows the gentleman from Georgia, whom we
[[Page H3506]]
heard earlier, to offer three amendments. It allows for every single
Member of this House, Democrat or Republican, to be able to offer an
amendment to this bill.
This is something new compared to the way the Rules Committee was run
under the previous leadership. This is a rule that allows people to be
able to heard, to be able to bring their views to the floor, and to be
able to debate them. For the gentleman from Texas or the gentleman from
Georgia or anybody else to complain that somehow this is a restrictive
rule just defies the facts.
The fact of the matter is that under their leadership, restrictive
rules were the norm. Closed rules were the norm. Not once, not once did
I hear anybody on the other side complain about the restrictive rule or
closed rule or even vote against the closed rule. This allows every
single Member who wanted to offer an amendment to offer an amendment.
This is an open rule with a preprinted requirement. This is a good
rule. I would urge all my colleagues to support the rule.
The material previously referred to by Mr. Sessions is as follows:
(The information contained herein was provided by
Democratic Minority on multiple occasions throughout the
109th Congress.)
The Vote on the Previous Question: What It Really Means
This vote, the vote on whether to order the previous
question on a special rule, is not merely a procedural vote.
A vote against ordering the previous question is a vote
against the Democratic majority agenda and a vote to allow
the opposition, at least for the moment, to offer an
alternative plan. It is a vote about what the House should be
debating.
Mr. Clarence Cannon's Precedents of the House of
Representatives, (VI, 308-311) describes the vote on the
previous question on the rule as ``motion to direct or
control the consideration of the subject before the House
being made by the Member in charge.'' To defeat the previous
question is to give the opposition a chance to decide the
subject before the House. Cannon cites the Speaker's ruling
of January 13, 1920, to the effect that ``the refusal of the
House to sustain the demand for the previous question passes
the control of the resolution to the opposition'' in order to
offer an amendment. On March 15, 1909, a member of the
majority party offered a rule resolution. The House defeated
the previous question and a member of the opposition rose to
a parliamentary inquiry, asking who was entitled to
recognition. Speaker Joseph G. Cannon (R-Illinois) said:
``The previous question having been refused, the gentleman
from New York, Mr. Fitzgerald, who had asked the gentleman to
yield to him for an amendment, is entitled to the first
recognition.''
Because the vote today may look bad for the Democratic
majority they will say ``the vote on the previous question is
simply a vote on whether to proceed to an immediate vote on
adopting the resolution . . . [and] has no substantive
legislative or policy implications whatsoever.'' But that is
not what they have always said. Listen to the definition of
the previous question used in the Floor Procedures Manual
published by the Rules Committee in the 109th Congress, (page
56). Here's how the Rules Committee described the rule using
information form Congressional Quarterly's ``American
Congressional Dictionary'': ``If the previous question is
defeated, control of debate shifts to the leading opposition
member (usually the minority Floor Manager) who then manages
an hour of debate and may offer a germane amendment to the
pending business.''
Deschler's Procedure in the U.S. House of Representatives,
the subchapter titled ``Amending Special Rules'' states: ``a
refusal to order the previous question on such a rule [a
special rule reported from the Committee on Rules] opens the
resolution to amendment and further debate.'' (Chapter 21,
section 21.2) Section 21.3 continues: Upon rejection of the
motion for the previous question on a resolution reported
from the Committee on Rules, control shifts to the Member
leading the opposition to the previous question, who may
offer a proper amendment or motion and who controls the time
for debate thereon.''
Clearly, the vote on the previous question on a rule does
have substantive policy implications. It is one of the only
available tools for those who oppose the Democratic
majority's agenda and allows those with alternative views the
opportunity to offer an alternative plan.
____
Amendment to H. Res. 301 Offered by Rep. Sessions of Texas
On page 2, lines 18 and 19, strike ``in a daily issue dated
April 17, 2007, or earlier''.
Mr. McGOVERN. Mr. Speaker, I yield back the balance of my time, and I
move the previous question on the resolution.
The SPEAKER pro tempore. The question is on ordering the previous
question.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. SESSIONS. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this question will be postponed.
____________________