Wall Street Pays Bankers to Work in Government and It Doesn't Want Anyone to Know
by David Dayen
The New Republic, Feb. 4, 2015
EXCERPT...
The handouts recently received attention when Antonio Weiss, the former investment banker at Lazard now serving as counselor to Treasury Secretary Jack Lew, acknowledged in financial disclosures that he would be paid $21 million in unvested income and deferred compensation upon exiting the company for a job in government. Weiss withdrew from consideration to become the undersecretary for domestic finance under pressure from financial reformers, but the counselor position—which does not require congressional confirmation—probably still entitles him to the $21 million. The terms of the award are part of a Lazard employee agreement that nobody has seen.
These payments are routine at major banks, several of which have explicit policies, found in filings with the SEC, outlining automatic awards for executives who rotate into government. Goldman Sachs offers “a lump sum cash payment” for government service, for example.
Other banks’ policies are subtler. Banks often defer certain types of compensation in order to retain talent. When an executive terminates employment, unvested stock options and other forms of deferred compensation are usually forfeited. But several companies let executives’ equity options continue to vest if they leave for a government position, or allow them to keep retention bonuses that would otherwise be returned to the firm. A 2004 tax law banned accelerated payments but made an exemption for employees who leave for government service. Critics wonder whether the gifts are intended to fill the government with friendly faces who will act in their former employer’s interests.
“It fuels the revolving door between banks and the government,” said Michael Smallberg, an investigator for the Project On Government Oversight (POGO), whose 2013 report detailed these types of compensation agreements. The average executive branch salary is substantially less than these millions in awards, so the bonuses effectively supplement the lower pay, raising questions about who the government officials actually work for.
SNIP...
Last November, Trumka wrote letters to seven mega-banks—Citi, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Wells Fargo and Lazard—asking their compensation committees to explain why giving incentives to executives for government service benefits shareholders or the company. The labor federation holds shares in many public companies through its pension funds. “We oppose compensation plans that provide windfalls to their executives unrelated to performance,” the letter states.
CONTINUED...
http://www.newrepublic.com/article/120967/wall-street-pays-bankers-work-government-and-wants-it-secret
= new reply since forum marked as read
