One of the lesser-known elements of the sweeping Dodd-Frank Act aimed primarily at reforming the nation's banks is directing the Securities and Exchange Commission to write rules that could temper the compensation of executives across multiple industries.
At issue is a requirement in the statute that directs the SEC to give institutional investors -- starting in 2011-- a vote on the pay packages of top executives at U.S. corporations. While the vote is non-binding and corporations are not required to follow the wishes of shareholders, the provision is expected to have a transformative impact on the relationship between CEOs and institutional investors, in part, because of the embarrassment a company could experience if investors give its executive pay a strong negative vote.
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