O'Neal's $161 Million Merrill Package May Spur Senate (Update1)
By Alison Vekshin and Ian Katz
Nov. 2 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd says Merrill Lynch & Co.'s $161.5 million compensation package for former Chairman and Chief Executive Officer Stan O'Neal may revive efforts in Congress to give shareholders more power to curb CEO salaries.
O'Neal shouldn't be rewarded for poor performance, Dodd said in an interview in Washington, adding that his committee may proceed with legislation aimed at reining in excessive executive pay.
``There's a lot of controversy, mostly on the other side,'' said Dodd, a Connecticut Democrat, referring to Republicans. ``We'll try to get unanimity where we can. But there's a possibility we'll move on it.''
A bill to give investors a non-binding vote to protest excessive compensation was approved by the House of Representatives in April, almost four months after Home Depot Inc.'s ex-CEO, Robert Nardelli, got a severance package valued at $210 million. O'Neal left Merrill earlier this week with $161.5 million in securities and retirement funds. Merrill's board said O'Neal ``retired'' and refused to give him a severance package following a record $8.4 billion writedown of subprime mortgages.
The U.S. Securities and Exchange Commission, responding to complaints from investors, adopted rules in July 2006 to make executive compensation more transparent to shareholders. In the Senate, Dodd will need to pick up some Republican votes to get the so-called say-on-pay bill moving again.
Obama Legislation
``I don't think it should be Congress's prerogative to get involved in the internal affairs of corporations,'' said Colorado Republican Wayne Allard, who's a member of the Senate Banking Committee, in an Oct. 30 interview. ``The boards have a definite responsibility. I don't feel like the federal government ought to be stepping in.''
Dodd hasn't yet called for a hearing on the legislation, introduced in April by Senator Barack Obama, Dodd's rival in the race for the Democratic presidential nomination. Obama offered a bill mirroring the legislation that Representative Barney Frank pushed through the House.
Dodd is studying initiatives ``that would improve shareholder rights and input in the executive compensation process,'' his spokesman, Marvin Fast, said in a statement. Ideas include giving the SEC more authority to compel disclosure about pay packages and improving shareholders' access to corporate ballots.
Merrill announced O'Neal's retirement Oct. 30, less than a week after he lost the board's confidence by posting a $2.24 billion third-quarter loss. Much of O'Neal's pay was negotiated when he became CEO in 2002.
Failure Pay
``Why do you give someone a contract that winds up paying him so handsomely when he fails?'' said Frank, a Massachusetts Democrat who is chairman of the House Financial Services Committee, in an Oct. 30 interview. ``It shows this problem hasn't gone away.''
O'Neal's compensation package will be among the 10 largest ever for a departing executive, said Paul Hodgson, a compensation analyst at the Corporate Library, a Portland, Maine-based research firm. Exxon Mobil Corp. paid CEO Lee Raymond $357 million when he retired last year and former Pfizer Inc. CEO Hank McKinnell received $200 million.
The Senate legislation ``would improve things considerably,'' by giving shareholders a stronger voice in executive compensation, Hodgson said.
Companies like Verizon Communications Inc. aren't waiting for Congress to act. The New York-based company said yesterday it will hold an advisory vote allowing investors to weigh in on executive pay each year starting in 2009. Shareholders passed a proposal in May calling on the company to adopt such a measure.
Verizon, the second-biggest U.S. phone company, paid Chief Executive Officer Ivan Seidenberg $21.3 million last year.
To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net ; Ian Katz in Washington at ikatz2@bloomberg.net .
Last Updated: November 2, 2007 13:41 EDT |
