FDIC Seeks To Claw Back Executives Pay
(Bloomberg) The FDIC is thinking about a measure that would subject executives and directors to clawbacks of as much as two years’ pay if they are found “substantially responsible” for the failure of a systemically important financial company. Incentive-based compensation was faulted for inspiring risk-taking at firms such as Lehman and American International Group Inc. (AIG)
FDIC board members voted 5-0 to propose the rule, part of the agency’s expanded liquidation authority under the Dodd-Frank Act. In the same vote, board members laid out a framework for priority payment of creditors and procedures for filing claims in liquidations of large, complex firms, for which the FDIC would serve as receiver.
“Today’s action is another significant step toward leveling the competitive playing field and enforcing market discipline on all financial institutions, no matter their size,” FDIC Chairman Sheila Bair said in a statement. “Under Dodd-Frank, the shareholders and creditors will bear the cost of any failure, not taxpayers.”
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