Letter supporting the Garrett Substitute Amendment to H.R. 3269, the "Corporate and Financial Institution Compensation Fairness Act of 2009"
July 31, 2009
TO THE MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES:
The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, believes that strong corporate governance is an important part of the foundation for a vibrant and growing economy. The Chamber supports a Substitute Amendment, offered by Rep. Garrett, which would address many of the concerns with H.R. 3269 expressed by the Chamber in previous correspondence. Specifically,
- The Substitute Amendment removes compensation regulation provisions.
Section 4 of H.R. 3269 would establish a mechanism for the financial regulators to regulate the compensation of executives and employees. Financial services firms would be required to submit practices and plans for incentive compensation for employees to their appropriate regulator. The regulator would then have the authority to approve or disapprove such plans, as well as take action for violations. In many firms, because incentive compensation plans range from the CEO to the receptionist, these provisions would place the federal government in the position of regulating compensation for all, or a vast majority of, employees in a company. As the legislation is currently written, H.R. 3269 would represent a tremendous intrusion into affairs of business that has always been left to private actors. By removing Section 4 of H.R. 3269, the appropriate relationship between business, employees and the federal government would remain intact.
- The Say on Pay provisions would be improved.
The Substitute Amendment would provide Say on Pay votes on a triennial basis. A triennial vote on Say on Pay will be reflective of the three year compensation package, whereas an annual vote on a three year compensation package will not accurately express opinions on the part of shareholders and not give directors the meaningful feedback needed for appropriate investor relations. By allowing a five year opt-out of Say on Pay votes through a vote of a supermajority of shareholders, small and mid-size businesses, in particular, will be given the flexibility to avoid a burdensome annual vote and be allowed to concentrate on the growth and management of the company. The Garrett Substitute would improve the Say on Pay provisions of H.R. 3269, by establishing a process that is more meaningful to shareholders and directors and providing the flexibility needed by small and mid-size businesses.
The Chamber supports strong corporate governance in line with our Statement of Principles, and urges you to support the Garrett Substitute to H.R. 3269.
R. Bruce Josten