Barney Frank

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Speaker, I ask unanimous consent that all Members may have five legislative days within which to revise and extend their remarks on H.R. 1257, and to insert extraneous material thereon.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Chairman, I move that the Committee do now rise.

Mr. FRANK of Massachusetts. I will take back my time to say that you cannot, the gentleman could have offered a broader agreement. I do not agree. Yes, I would ask for unanimous consent to make a slight technical change in an amendment to fix wording. But to go into a much broader version of the subject, under these circumstances, without a hearing, without full participation in a mark up would be inappropriate, and that is what I mean by on the fly.

Mr. FRANK of Massachusetts. Well, it is late and I am sometimes cranky. I can't say that I would be happy to work with the gentleman, but I would be willing to.

Mr. FRANK of Massachusetts. All votes.

Mr. FRANK of Massachusetts. No, I will take back my time to say to the gentleman, I will not legislate on serious subject matter involving large numbers of institutions on a unanimous consent agreement to an amendment that he filed when he could have filed whatever he wanted at a quarter to 8 or at any other time. I think there should be hearings. I have said we will do this. You know, the gentleman on the other side may, with the motions to recommit, believe in the 5-minute solution to complex problems. I don't. I think it degrades the legislative process. I will not be a party to it. I will not agree. The gentleman could have filed any amendment he wanted to that was germane. He could have filed a broader amendment. We could have had more debate and discussion on it. I do not agree I or he or any of us off the top of our heads are able to decide how better to broaden this. And there is a disagreement between us about labor unions. Let's make it explicit. That is partly what is involved here. There has been a degree, I believe, of denigration and demonization of labor unions, that is part of the reason I think we have the economic inequality we have. For pension funds I read labor unions because they are identified with unions. The gentleman from North Carolina, who is a very good lawyer, mentioned a number of other entities that should be covered if you were going to be covering fiduciaries. I do not think it is accidental that only pension funds are mentioned. I think that bespeaks this notion that labor unions are somehow in need of more supervision, that they are more damaging and dangerous. I think the opposite is the case. I think there have been abuses from foundations. There have been some abuses from unions. So that is why I object to doing this, because I do not think it is the first step. I think it is part of a denigration of the role of labor unions from which this country suffers. Indeed, I will just say I am struck as we debate now whether or not to put standards from the international labor organizations into our trade treaties. We are now being told by opponents that we can't do that because America doesn't meet those standards; that because of the years of denigration of the labor unions, we don't meet those standards. So I do not agree to single out pension funds because I do not agree that we should join in this somehow, this suspicion of unions. And I don't agree that in a unanimous consent agreement off the top of our heads we ought to decide how more broadly to do it. I would rather legislation responsibly. The committee that we are all members of, those of us who are now on the floor, has been, I think, a very thoughtful forum, not just under my chairmanship, under the chairmanship of my predecessor. We have hearings. We have an excellent staff on both sides. We have worked together. I look forward to hearings on extending the principle of fiduciaries having to reveal how they have voted on all issues and to all fiduciaries. But I do not think we should single out pension funds tonight, nor do I think we should on the fly try to broaden it, so I oppose the amendment. And I will yield now to the gentleman.

Mr FRANK of Massachusetts

Mr FRANK of Massachusetts. Yes.

Mr. FRANK of Massachusetts

Mr. FRANK of Massachusetts. Mr. Chairman, I move to strike the last word. I am disappointed in the characterization. In the first place, it is not accurate that germaneness prevented this from being a broader amendment. As I acknowledged, germaneness does prevent this from getting into other subject matters. But nothing would have prevented this from applying to the other entities that my colleague from North Carolina enumerated. Nothing would have said that other fiduciaries could have been covered. And that is why I am against this amendment. Frankly, we have a difference between the parties here to a very great extent on labor unions and the contribution they make to the United States.

Mr. FRANK of Massachusetts. I have just been advised by staff, who is very knowledgeable on this, that part of the problem is, and I understand the gentleman has, as I think is appropriate, substantively the model of what was done with mutual funds, but I have been reminded that the SEC has a plenary power over mutual funds that it does not have over foundations. I have now been instructed that the SEC could not do that. You cannot reason that what they can do over mutual funds to what they can do over these other fiduciaries, so I think it would take separate legislation.

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?

Mr. FRANK of Massachusetts. I appreciate that spirit of cooperation, but it is getting late, and Friday is coming, so I would offer either a letter or roll call, but not both.

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?

Mr. FRANK of Massachusetts. I think the gentleman from North Carolina did correctly state my view, but my position was not simply to keep this bill clean, we did accept a couple of technical amendments. I would point out to him, in committee, the gentleman from Connecticut (Mr. Shays) had a substantive amendment, which we accepted, dealing with rights. My view is this: I agree on the principle that a fiduciary's vote should have to be made public, but I wouldn't want to limit it only to pension funds. I also don't think it should be limited only to this subject matter, although I agree, given germaneness, the gentleman couldn't have broadened it beyond that subject in this bill. But it could be broadened beyond pension funds. I believe we should have a hearing on the principle where the gentleman is correct, and I agree with him, that fiduciaries should have to be made public, but that is all fiduciaries on all issues.

Mr. FRANK of Massachusetts. I just wanted to say that this does not in any way enhance democracy. The notion that if you vote against this bill, you vote against democracy, makes no sense. The gentleman says it is an incentive to make the corporations do this. Apparently he believes that, assuming a nonbinding, ineffective, toothless advisory vote will provide a major incentive to corporations to make a major structural change; I don't.

Mr. FRANK of Massachusetts. Mr. Chairman, would the gentleman yield me 1 minute? I will talk fast.

Mr. FRANK of Massachusetts. I just want to repeat the point I made. This threat that we will take the company public, the CEO will take the company public, understand what that says: That if the CEO's pay is subject to a shareholder vote, in retaliation, he will make a fundamental change in the ownership structure. And, by the way, that assumes that the shareholders don't have anything to say about it. No, I do not think that shareholders will sit and vote for a takeover of the company just to allow the CEO to shelter his or her pay; so this threat, I think, is an empty one.

Mr. FRANK of Massachusetts. I am taking back my time. I will explain why to the gentleman, because I think it's going to be hard enough to get even this through. We have had people who said this is way too much. I do not think the gentleman speaks for his party in being supportive of something that will be far more opposed by a broader segment. If, in fact, that would happen, I would be supportive, but I do not want to have the chance to sacrifice this. I will say one other point. The argument is, why do you single this out? I believe there have been problems with boards of directors in general, although I will repeat again that the Chamber of Commerce, as was noted, thanks Sarbanes-Oxley for significantly improving the quality of boards of directors. I think our former chairman should be pleased to have this ringing endorsement of his handiwork from the Chamber of Commerce. But there is still this problem, boards of directors are at their least independent in dealing with the CEO who may have selected them. I do think there is reason to single out the CEO-board relationship from other issues. The other question I have is this and why I wouldn't vote for this amendment in any case, it says a majority vote, but here is the problem. In many corporations, there is no way to nominate someone to be on the board, other than by the board. There are many corporations that do not allow that. If the gentleman wants to come in with a bill that says shareholders, a certain minimum number, not any one person, but if we could agree that a reasonable number of shareholders could designate alternative candidates, then we could do this. An election in which you require a majority to be elected is part of the democracy, but an alternative is also part of the democracy. The gentleman has half of the democracy in here. He has a requirement of the majority vote, but no requirement that there be any competition. As we all know, the fact of competition could affect the final vote. If the gentleman's newly found interest in this sustains itself, and he says it will, and he wants to file a bill that requires that there be access, proxy access to our nomination process and then a majority vote, he will have my support. Until then, though, I see no reason, in the hopes of that, to get rid of this bill. I do want to respond to an earlier comment by the gentleman from New Jersey who said we could only do it for excessive compensation. He fundamentally misunderstands this bill and contradicts itself. It is not the job of the Congress to say what it is or isn't excessive. We have individual opinions about excess. We are leaving it to the shareholders. The gentleman said they should only have to vote if it is more than such and such above the average. What about if you are getting average pay for a subpar performance? What if the shareholders of a particular corporation say, this man doesn't deserve the average, this woman hasn't lived up to the average? The notion that we should qualify the abilities of shareholders to vote on what to pay the owners of their own company, based on what we think is excessive, an empirical definition put in the bill, fundamentally misunderstands what we are trying to do, which is to empower the shareholders to express their opinion. Members keep saying it is simply only advisory. I do not think, Mr. Chairman, that anyone believes that. I do not think that anyone thinks that an advisory vote of shareholders would be easily dismissed by boards of directors. One final point, the suggestion if we do this, the boards of directors and CEOs in pique will take their companies private, when presumably they otherwise wouldn't, because that is the only way it could be causal, what a condemnation of CEOs. How dare you vote on my pay? I will take my company private. By the way, in fact, you can't take the company private over the shareholders' objections.

Mr. FRANK of Massachusetts. Mr. Chairman, I move to strike the requisite number of words. The gentleman from California mischaracterized my argument. I didn't say that it wasn't intrusive enough because it wasn't mandatory. I was responding to his earlier assertion which might have led people to think it was mandatory. I was simply correcting the characterization. I would say this. If the gentleman wants to introduce a bill, and he complains a little bit, well, that he was only able to offer this amendment because only in this form is it germane to this bill; I know the gentleman is a relatively new Member, maybe he didn't understand that Members have the right to file any legislation they want. Had the gentleman genuinely wanted to deal with this and broaden the right of shareholders with regard to elections of the boards of directors, that if I were here, I would have filed such a bill, I will tell him now, I will yield only if I can get unanimous consent to extend my time. If Members tell me that, I will be glad to yield. No problem. I will be glad to yield in a minute just to say this: If the gentleman now decides, having considered this, that he wants to file such a bill, I will guarantee him a hearing. I will say this: We will find more opposition to it if we were to mandate that. That is one of the factors I will introduce. I would say, until we had filed this bill, I had not seen any indication from the gentleman this is what he wants to do. If he wants to file a bill to give shareholders the right to vote by a majority for directors, and I think there has to be further change, then I would be happy to guarantee a hearing. I will yield to him.

Mr. FRANK of Massachusetts. Mr. Chairman, I ask unanimous consent that the gentleman from Texas be permitted to proceed for 2 additional minutes.

Mr. FRANK of Massachusetts. I will extend the gentleman a similar courtesy.

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?

Mr. FRANK of Massachusetts. I thank the gentlewoman. She is, as always, a staunch defender of her constituents, including those who were hurt by Enron. I could not object to this in principle, and I did say this. We made an effort to make this bill minimally intrusive. I would expect that these votes would be promptly published. But the gentlewoman has a legitimate concern, and I would make this commitment to her: If this bill becomes law and we encounter any effort not fully and promptly to publish these, then I promise her an immediate hearing and action on her amendment. So I think we will take this, I hope, as a chance to give people the message, if this bill becomes law, it should be complied with forthrightly and effectively; and if we encounter any efforts at any kind of obfuscation, then the gentlewoman, I promise her, will be back on the floor with our support.

Mr. FRANK of Massachusetts. Mr. Chairman, will the gentlewoman yield?

Mr. FRANK of Massachusetts. I appreciate the other side going into their non-objectionable mode, at least for the nonce. I did this because I had an amendment that included several provisions, one of which was identical to the provisions the gentleman from Illinois just offered, and that having been adopted, it would be redundant to do it again. This is, again, I believe, a technical amendment. It simply tries to conform the language in the bill with regard to what it requires. I think the best way to say it, Mr. Chairman, is this. There was disagreement on the substance of what we require. We did want to make it clear, however, that we weren't requiring any more than that, and any suggestion that we might have been creating procedural or other kinds of obstacles, we wanted to work together to avoid. This is in furtherance of that, so I ask that the amendment be adopted.

Mr. FRANK of Massachusetts. Mr. Chairman, I rise to offer amendment No. 4 and to make a unanimous consent request to modify it.