The U.S. House of Representatives passed a bill on Friday that will give regulators additional power to limit compensation of banking and financial institution executives. The move comes in an effort to minimize the incentives for bankers and traders to take excessive risks in the chase of massive profits.
The executive compensation bill, mainly backed by democrats, passed on a 237-185 vote and saw limited resistance from republicans due to a report just a day earlier that showed nine of the country’s largest banks paid individual bonuses of $1 million or more to nearly 5,000 employees last year. All nine of the banks had received federal bailout money over the past year.
That report was released by the office of New York Attorney General Andrew M. Cuomo, stating that a total of $32.6 billion in bonus money was paid out last year by the nine largest banks.
The bill also gives company shareholders a say, allowing them to vote against proposed pay packages. Though, those votes will only be considered advisory and cannot actually prevent a compensation package, executives will likely shy away from upsetting the shareholders who are technically the firm’s first interest.
Another item in the bill will force a banks compensation committee to be completely independent of management. However, the restriction will only be applicable to firms with total assets in excess of $1 billion.
Speculation already exists that the bill will face a more difficult road to approval in the Senate than it did in the House as some policymakers want to combine the executive pay limits with some of Obama’s other financial regulation reform proposals. The move could delay the executive compensation bill if it becomes packaged with other proposals.
The Senate will not meet to discuss the bill till after its summer recess, which began on Friday. Policymakers will reconvene after Labor Day.
