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House committee approves bill to regulate executive compensation

[JURIST] The US House Committee on Financial Services [official website] on Tuesday approved [press release] the Corporate and Financial Institution Compensation Fairness Act [HR 3269 text, PDF], which would restrict the way in which executives for publicly-traded companies can be compensated. Committee members say the bill would discourage executive compensation packages that emphasize short-term gains over long-term stability, which they say helped to cause the country's recent financial collapse. The bill includes a so-called "say-on-pay" provision that would allow shareholders an advisory vote on compensation. It would also require the disclosure of packages that include performance-based incentives and allow regulators to prohibit certain packages that are considered particularly "high risk." It does not provide a monetary cap on compensation. The entire House of Representatives [official website] is expected to discuss the bill on Friday.

The US has already imposed more stringent rules on compensation for executives of companies that received financial assistance from the government following the collapse. In April, the House approved [JURIST report] a bill [HR 1664 materials] that allows the Treasury Department [official website] to ban certain types of compensation at companies which receive federal bailout money from the Troubled Asset Relief Program (TARP) [JURIST report]. Earlier that month, it passed [JURIST report] legislation [HR 1586 text, PDF] that would tax bonuses given to employees of companies that received money from government stimulus programs at 90 percent. In February, President Barack Obama [official profile] placed a $500,000 cap on executive compensation [WH press release; JURIST report] for companies receiving "exceptional assistance" from the federal government.

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