BOSTON, March 27 (Reuters) - An architect of the shareholder votes companies hold on executive compensation said he is “disappointed” they have not led to more changes, noting that wealthy mutual fund company leaders make weak overseers of CEO pay.
“The decision-makers at the heads of these institutions also get paid a lot of money. They’re not inclined to cut anyone else’s salary,” said Barney Frank, the retired Massachusetts congressman, in a recent telephone interview.
Frank cited leaders of top asset managers including BlackRock Inc, Vanguard Group and Fidelity Investments, which are often among the largest shareholders of S&P 500 companies. “They’re like the people whose pay they’re voting on,” he said.
Frank’s comments came at the start of the spring proxy season when most large U.S. companies give shareholders a non-binding advisory vote on pay, as required under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act which he co-authored.
A Vanguard spokesman declined to comment. A Fidelity spokesman said it gives feedback to hundreds of companies a year on governance and pay practices and casts its votes “in the best interests of fund shareholders.”
A spokesman for BlackRock said its team that oversees voting “makes decisions based on its view of how best to protect and enhance the long-term value of our clients’ assets” and independent of BlackRock’s management.
Closely held Vanguard and Fidelity do not disclose pay for their top executives. BlackRock paid Chief Executive Laurence Fink $22.9 million in 2013, according to the top U.S. asset manager’s most recent pay disclosure.
Frank, a Democrat, was interviewed on a book tour to promote his recent memoir about his life and career in Congress, which he left after not seeking re-election in 2012.
Since then CEO compensation has gone up with the help of rising markets and as shareholders support most companies on pay. In recent years the three fund firms have supported executive pay at S&P 500 companies around 95 percent of the time, according to research firm Fund Votes.
Frank called CEO pay too high overall and said it depletes how much companies have left to pay other employees.
However, Frank said the votes have proven useful for investors to express displeasure with management. He said he would favor higher taxes on big CEO compensation packages, but that it should fall to shareholders, not regulators, to set pay levels.
“Empowering the shareholders is good,” he said. (Reporting by Ross Kerber; Editing by Richard Chang)