New ‘say on pay’ rules would be non-binding

The proposed “say on pay” legislation for U.S. corporations announced by the Obama administration Wednesday would be non-binding, according to a Treasury department fact sheet.

Treasury Secretary Tim Geithner said the administration would push for so-called “say on pay” legislation, which gives shareholders an opportunity to review companies’ compensation packages, as part of its bid to curb executive compensation.

According to a fact sheet released by the Treasury, that review opportunity would be non-binding.

The Treasury-backed legislation would give shareholders in companies the right to vote on the annual compensation for a public company’s top five named executives, as well as an opportunity to vote on “golden parachutes” for executives who leave the company.

While the vote may not be explicitly able to veto or change compensation packages, it could have the effect of discouraging compensation shareholders might find objectionable.

A bill on the same issue introduced by Sen. Charles Schumer (D-N.Y.) earlier this year also called for non-binding say on pay.

The Securities and Exchange Commission (SEC) will be charged with administering the “say on pay” votes, as well as new rules on compensation committees’ independence.

“Our role is really to protect investors by making sure they have all the information to make sound investment decisions,” SEC Chairwoman Mary Schapiro said of the new role her own agency would receive in regulating executive pay.

President Obama sponsored similar legislation on say on pay while in the Senate.