Tuesday AM February 1st, 2011

The SEC rule requires public companies, for the first time, to submit top executives’ compensation packages to shareholders for approval. While the votes are non-binding, board members are likely to treat them as votes of no confidence, curbing packages to which shareholders object

Steve Cross, head of Houston-based Cogent Compensation Partners, says that faced with such compensation limits, executives at publicly held energy companies may walk.

“The private sector market for oil and gas companies is quite vibrant, as are the private equity funds who are willing to fund startups and significant acquisitions in the form of privately held companies. [That] means that executives of public companies have a very wide open playing field of alternatives at which to apply their trade.”

Cross says the end result will be to discourage risk taking by public companies—limiting both losses and gains to shareholders.