New York City Comptroller John C. Liu, who oversees $108 billion in pension funds, said Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Morgan Stanley should target senior executives’ pay to prevent improper or risky practices.
Liu filed shareholder requests with the three New York- based banks to toughen their so-called clawbacks, which allow the firms to reclaim pay awarded to employees who acted improperly. The lenders, which now limit clawbacks to individual wrongdoers, should target supervisors as well, Liu said in a statement today. The city’s pension funds held $483.3 million in shares of the firms through Dec. 19, according to the statement.
Perverse incentives and bad compensation practices helped cause the financial crisis by encouraging Wall Street employees to disregard risk in the pursuit of profit, according to a study last year by the Council of Institutional Investors. Liu targeted the three firms as they have each paid more than $100 million over the past 18 months to settle charges of improper conduct tied to mortgage-backed securities.
“No one should profit or be rewarded with bonuses when engaged in improper or unethical behavior,” Liu said in the statement. “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.”