August 10, 2009

Efforts in Congress to toughen restrictions on executive compensation likely would upend pay practices all across the financial services industry.On July 31, the House passed the Corporate and Financial Institution Compensation Fairness Act on a 237-185 vote.

The bill, which likely will be taken up by the Senate in the fall, would give shareholders of public companies annual, non-binding advisory votes on executive pay and “golden parachute” severance packages.The legislation also contains a key provision that would allow regulators to prohibit payment practices at financial services companies which would encourage officers or employees to take risks that threatened the safety and soundness of those companies.