[ed. I'd imagine they'd also be concerned with what the 'claw-ee' might have to say if such actions were taken.]
Members of the U.S. Senate Banking Committee are demanding that Wells Fargo & Co. claw back pay from Carrie Tolstedt, the executive whose community banking unit created 2 million unauthorized customer accounts. They’re not likely to get as much as they want.At a hearing in Washington on Tuesday, senators cited figures eclipsing $100 million. During her three-decade career at Wells Fargo and its predecessors, Tolstedt received about $44 million in shares, $34 million in vested options and still more from cash bonuses and stock sales. But the bank’s clawback policy, like that of most U.S. companies, doesn’t allow Wells Fargo to go after those assets unless there’s a financial restatement. When the damage is reputational harm, only unvested stock awards can be recouped -- in the case of Tolstedt, 56, whose retirement was announced in July, that’s about $19 million. (...)
Malus Awards
While clawback policies have exploded in popularity -- 76 percent of the biggest banks around the world have them, up from 44 percent in 2010, according to Mercer, a compensation-consulting firm -- they’re rarely used. During the past two years, only 10 percent of companies polled by Mercer in April used such policies to reclaim compensation that had already been paid.
“Clawbacks are easier said than done,” said Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance. “Once it’s out the door, it’s hard to get back.”
More common, and easier to pull off, is the cancellation of compensation a company has promised to pay executives and other employees in the future. Even more firms have this type of malus policy -- think opposite of bonus, both words from Latin. In Mercer’s survey, 90 percent of big banks had some clause to rescind unvested incentives for reasons ranging from misconduct to poor performance. Half the banks polled applied their malus policies in the past two years. (...)
While clawback policies have exploded in popularity -- 76 percent of the biggest banks around the world have them, up from 44 percent in 2010, according to Mercer, a compensation-consulting firm -- they’re rarely used. During the past two years, only 10 percent of companies polled by Mercer in April used such policies to reclaim compensation that had already been paid.
“Clawbacks are easier said than done,” said Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance. “Once it’s out the door, it’s hard to get back.”
More common, and easier to pull off, is the cancellation of compensation a company has promised to pay executives and other employees in the future. Even more firms have this type of malus policy -- think opposite of bonus, both words from Latin. In Mercer’s survey, 90 percent of big banks had some clause to rescind unvested incentives for reasons ranging from misconduct to poor performance. Half the banks polled applied their malus policies in the past two years. (...)
Businesses end up reserving clawbacks for the most extreme circumstances. JPMorgan Chase & Co. went after the traders who lost $6.2 billion during the London Whale scandal. In addition to canceling unvested bonuses, the firm asked them to return some cash they already had been paid. All but one agreed to do so, and JPMorgan sued holdout Javier Martin-Artajo in a case settled three months later. While the bank didn’t reveal how much it managed to recoup from him, the total recovered from those involved exceeded $100 million in cash and unvested stock, according to its 2012 annual report. The figure was equal to two years’ compensation for the four former employees.
“Malus is applied frequently, but clawbacks are very rare,” said Vicki Elliott, head of global financial-services talent at Mercer. “It has to be a big, transparent blowout for a firm to attempt clawing back money already paid out.”
In many European countries, labor laws prevent clawbacks, while in the U.S. the legal process can drag on for years and be costly, Elliott said.
“Malus is applied frequently, but clawbacks are very rare,” said Vicki Elliott, head of global financial-services talent at Mercer. “It has to be a big, transparent blowout for a firm to attempt clawing back money already paid out.”
In many European countries, labor laws prevent clawbacks, while in the U.S. the legal process can drag on for years and be costly, Elliott said.
by Caleb Melby and Yalman Onaran, Bloomberg | Read more:
Image: Bloomberg
