Big Wall Street bonuses incentivize risky behavior that can put our entire economy at risk. That’s why the Dodd-Frank Act required regulators to ban massive bank pay packages that encourage inappropriate risks. But we need the regulators to follow through and make that ban real!

The recent Wells Fargo scandal has made it clearer than ever that we can’t rely on big banks to claw back all ill-gotten bonuses. Wells Fargo created 2 million accounts that customers didn’t ask for, incurring $185 million in fines and penalties as a result. But the current compensation Wells is taking back from its executives will only pay for one-third of these fines, leaving shareholders and pensioners to bear the rest of the burden. Worse still, Wells Fargo executives will get to keep all of the enormous bonuses they have already pocketed. And even if Stumpf is fired, he could walk away with over $150 million.¹

That’s why the regulators’ executive compensation rule² needs to go further. At a minimum, it must require key executives to pay back their past bonuses if their firm has committed illegal acts or takes irresponsible risks that later cause huge losses. When there’s widespread misconduct, clawbacks should be mandatory, not optional. Otherwise, it will take a PR disaster of Wells Fargo proportions for banks to claw back executive’s giant pay packages.

Help us urge the banking regulators to finalize a strong and meaningful executive pay rule, to make sure that big bank bonuses are no longer a threat to the safety of our economy.

Sources:

1. An analysis conducted by CNN Money before the clawbacks were announced found that the Wells Fargo CEO could walk with $200 million. After forgoing $41 million in compensation, Stumpf could still walk with $159 million. money.cnn.com/2016/09/22/investing/wells-fargo-ceo-john-stumpf-200-million/index.html

2. Joint Agency Proposed Rule: Incentive-based Compensation Arrangements, sec.gov/rules/proposed/2016/34-77776.pdf