Democratic Senators Call for Stricter Rules on Wall Street Pay
October 26 2016 - 7:18PM
Dow Jones News
By Yuka Hayashi
WASHINGTON -- Fifteen Democratic senators urged federal
regulators to strengthen proposed rules governing Wall Street pay
practices, saying the recent scandal at Wells Fargo & Co.
underscored the need to hold executives accountable for
misconduct.
The request comes as policy makers rush to complete the rules
before President Barack Obama leaves office in January. The rules
on pay represent one of the big remaining pieces of the Obama
administration's regulatory overhaul of the financial industry.
The senators laid out their ideas in a letter addressed to the
heads of six federal agencies responsible for crafting the pay
rules.
The lawmakers who signed the letter include Sens. Robert
Menendez of New Jersey; Sherrod Brown of Ohio, the top Democrat on
the Senate Banking Committee; and Elizabeth Warren of
Massachusetts, the leading congressional critic of Wall Street. If
Democrats regain a majority in the Senate in the November
elections, as many analysts forecast, these lawmakers would have
stronger clout to influence policy debates at the powerful banking
panel.
The rules, proposed in April, are aimed at curbing what
regulators see as excessive risk-taking. The rules would require
the biggest financial firms to defer payment of at least half of
executives' bonuses for four years, a year longer than common
industry practice. The plan also would require a minimum period of
seven years for the biggest firms to claw back bonuses if it turns
out an executive's actions hurt the institution or if a firm has to
restate financial results.
In the letter, the lawmakers asked for bonus pay to be deferred
longer than four years and for clawbacks and pay reductions to be
mandatory rather than optional.
The senators said four years is too short for clawbacks,
considering that it might take much longer for the full scope of
wrongdoing to become apparent. They also asked for failures in risk
management and culpable negligence in employee oversight to be
added to the conditions that could trigger clawbacks. The current
proposal only cites malfeasance by an individual employee as such a
condition.
A number of lawmakers had initially praised a decision last
month by the Wells Fargo board to recoup an estimated $60 million
in pay from two top executives who presided over the scandal, which
resulted in the opening of as many as two million unauthorized
accounts and the firing of more than 5,000 low-level employees. The
15 lawmakers who signed the letter, however, described the
reclaimed amount as a "small fraction" of the compensation paid to
the executives and that even that action might not have happened
without "unusual public pressure."
"Your current work in crafting new executive pay rules...offers
a unique opportunity to address these accountability issues at
major banks," the senators wrote to the regulators. "However, we
have concerns that a number of specific weaknesses in the proposed
rule could render the new rule ineffective in creating
accountability for top executives."
House Democrats have also asked the regulators for tougher rules
on clawbacks.
The proposed rules were jointly crafted by six agencies: the
Federal Reserve, Securities and Exchange Commission, Office of the
Comptroller of the Currency, Federal Deposit Insurance Corp.,
National Credit Union Administration and Federal Housing Finance
Agency.
Write to Yuka Hayashi at yuka.hayashi@wsj.com
(END) Dow Jones Newswires
October 26, 2016 19:03 ET (23:03 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Wells Fargo (NYSE:WFC)
Historical Stock Chart
From Apr 2023 to Apr 2024