AFSCME filed the first shareholder "say-on-pay" proposals in 2005. In the four years since then, we've put together a broad coalition of investors fighting to get shareholders a voice on executive compensation. The U.S. House of Representatives is expected later today to vote on "say-on-pay" legislation crafted by Chairman Barney Frank (D-MA). In this morning's issue of the Capitol Hill newspaper The Hill, AFSCME President Gerald McEntee urges Congress to pass this bill as an important step in the effort to hold corporations accountable to shareholders.
While America's families continue to be battered by unemployment, foreclosures and other pains associated with the worst recession in decades, Wall Street executives are raking in the big bucks again.
Goldman Sachs is preparing to hand out $6.65 billion in salary and bonuses for the second quarter after getting funds from the taxpayer through the Troubled Assets Relief Program. JPMorgan put aside $14 billion to pay top executives and traders. That's just ridiculous. And since excessive executive compensation has flourished even when businesses are failing, shareholders need a say-on-pay.
President Barack Obama earlier this year decried the "culture of narrow self-interest and short-term gain at the expense of everything else" that has fostered corporate irresponsibility. CEOs like Martin J. Sullivan, who ran American International Group (AIG), the giant insurance and financial services firm, into the ground, illustrate the problem in our boardrooms. He was fired, but walked away with a severance package estimated at $47 million.
He wasn't alone. While the economy was thrown into turmoil and people across the nation lost their life savings, AIG executives continued to receive hefty bonuses. We've all taken a hit thanks to AIG's greedy manipulation of exotic investment products. The perverse system of excessive pay, even for failure, created incentives for foolish risk-taking by major financial institutions.
For years, AFSCME has worked to rein in the excessive paychecks unrelated to long-term performance that unaccountable corporate boards of directors have given many of America's CEOs. We've argued that boards cheat shareholders and workers when they cloak their operations in secrecy or are unaccountable to shareholders.
Responsibility for the worst economic collapse since the Great Depression can be laid at the feet of those CEOs who put short-term profits ahead of long-term and sustainable wealth creation. And that threatens the interests of shareholders, including working families whose savings are invested in the market. America's shareholders need sound management, accountability and the right to nominate members of the boards of the corporations in which they invest.
That's why AFSCME supports House Financial Services Committee Chairman Barney Frank's (D-Mass.) say-on-pay legislation. That bill, which passed the Financial Services panel Tuesday, would give shareholders an advisory vote on compensation packages and on "golden parachutes," and would make compensation committees more independent from management. This legislation is an important part of the broad financial reform effort necessary to re-regulate the financial industry and protect shareholders.
A key step to fixing our economy is making sure that the interests of shareholders and stakeholders are considered in corporate board rooms. We believe that Rep. Frank's proposal to give shareholders a say-on-pay will help hold corporations and their leadership responsible and accountable to their owners -- company stockholders. It's time to stop rewarding corporate executives for failure. It's time to make American companies transparent and accountable. We need bold action to bring these rampant abuses to an end.
From Gerald W. McEntee, president, American Federation of State, County and Municipal Employees, Washington
The AFSCME employee pension plans own stock in Goldman Sachs, JPMorgan and AIG.