The U.S. Treasury introduced draft legislation on Thursday requiring say on pay votes at public companies, and increased independence for firms’ compensation committees.

Treasury delivered draft legislation to the U.S. Congress designed to ensure that compensation committees are independent. It imposes tougher standards for independence; it requires that any outside advisors hired by the committee, such as compensation consultants and legal counsel, must be independent from management; and, it requires that compensation committees be given the authority and funding to hire outside advisors to help ensure that the committee bargains for pay packages in the best interests of shareholders.

Additionally, it produced draft say on pay legislation that would require all publicly traded companies to give shareholders a non-binding vote on executive compensation packages.

Under the proposed legislation, all public companies will be required to include a non-binding shareholder vote in the proxy for any annual meeting held after December 15. The disclosures that would be subject to the say-on-pay vote include tables summarizing salary, bonuses, stock and option awards and total compensation for senior executive officers, as well as summaries of golden parachute and pension compensation and a narrative explanation of the board’s compensation decisions. It would also mandate a separate vote on golden parachutes in the case of a merger or acquisition.

IE