Say on Pay?

Yaron Brook has written an Op-Ed attacking the Say On Pay bill that has passed in the US House of Representatives. The Op-Ed ran in modified form here at Investment News. The bill would force all corporations to allow shareholders a non-binding vote on CEO compensation, the idea being to shame directors in lowering CEO pay. While this bill itself might not do much -- since it forces only non-binding votes -- this bill would appear to be only a first step. As Brook notes, the Rep who proposed it, Barney Frank, has supported outright caps on CEO pay and "has threatened that if 'say on pay' does not sufficiently reduce CEO compensation relative to that of other employees, 'then we will do something more.'"

Brook's piece is a good read, and he notes several things that shareholders can do already if they are unhappy about the pay of a CEO, none of which require further regulation of business by government:

1. "Vote with his dollars" by selling his shares
2. Accumulate a controlling interest in the company (typically 51%) and impose a new board of directors
3. Persuade a majority of shareholders to replace the board with people sympathetic to their concerns.