New York City Comptroller John C. Liu and the NYC Pension Funds submitted shareholder proposals to JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley requesting that they “hold senior executives financially accountable for losses that result from excessive risk-taking or improper or unethical product.” The proposals would strengthen the banks’ existing clawback policies “that allow them to recoup incentive pay from employees who act improperly,” and would also “prevent the perverse incentives and bad practices that were at the heart of the financial collapse of 2008” by increasing executives’ accountability; holding supervisors responsible for bad behavior; and disclosing clawback actions.
JPMorgan, Goldman Sachs and Morgan Stanley were targeted as “they are among the largest and have each come under scrutiny for improper practices leading up to the financial crisis.” Moreover, each company “has paid more than $100 million over the past 18 months to settle state or federal charges in connection with mortgage securities.” Indeed, an article by Bloomberg News reported that Goldman Sachs agreed to pay $550 million in July 2010 to settle the government’s claims it misled investors concerning financial products connected to subprime mortgages. Similarly, JPMorgan agreed to pay $153.6 million to settle a suit in June. Also, “Morgan Stanley agreed to pay $102 million in June 2010 to settle claims by Massachusetts that the firm financed and securitized unfair residential loans.”
According to Comptroller Liu, “No one should profit to be rewarded with bonuses when engaged in improper or unethical behavior. These tougher clawback provisions will not only recover money that shouldn’t have been paid in the first place, but also set the tone for a stronger standard of conduct for company executives as well as their bosses.”
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