Here’s one sign of the unpopularity of overpaid corporate and banking executives: Shortly before heading home to face constituents during the summer recess, members of Congress introduced three bills to crack down on excessive compensation.
Stop Wall Street Looting
The new Stop Wall Street Looting Act would protect workers and communities against the vulture-like private equity firms that have plundered Toys R Us, Shopko, and many other companies. The bill was introduced by Sen. Elizabeth Warren (D-MA), the Co-Chairs of the House Congressional Progressive Caucus, and a bevy of other Democrats, including another presidential contender, Sen. Kirsten Gillibrand (D-NY).
Several provisions in the sweeping bill aim to prevent top executives from lining their pockets while workers and other shareholders suffer. Private equity fund managers, who often earn tens, if not hundreds of millions of dollars per year, make a killing off so-called “monitoring” or “transaction” fees they charge corporations they’ve taken over through leveraged buyouts. The Stop Wall Street Looting Act applies a 100 percent tax on such fees. It would also close the “carried interest” loophole, which allows private equity managers to pay the discounted capital-gains tax rate on their income.
The bill would also set limits on pay for the executives of firms in bankruptcy. Private equity funds have been connected to a rash of bankruptcies in recent years, particularly in the retail sector. A significant portion of the companies that have filed for bankruptcy carried debt loads leftover from leveraged buyouts by private equity firms. This has sparked increased interest in ensuring that executives at distressed firms do not enrich themselves while eliminating jobs and pensions.
The Stop Wall Street Looting Act would build on existing protections in bankruptcy law that ban companies from giving executives “retention” bonus or severance pay that runs over 10 times the average bonus or severance awarded to regular employees in the previous year. The new bill would close a loophole that exempts “performance-based pay.”
It would also ban special payments to high-level executives if the company has not paid promised severance pay to employees or has reduced employee benefits within the year before declaring bankruptcy. Courts would also be blocked from approving bankruptcy exit plans that allow excessive payments to execs.
Make Wall Street Bankers Pay for Wrongdoing