WASHINGTON – Sixteen Senate Democrats sent a letter to federal financial regulators on Wednesday asking them to strengthen a proposal to restrict executive compensation at financial firms.
"The recent revelations concerning widespread fraudulent practices at Wells Fargo have increased our concern about pay practices at major financial institutions," said the letter, which was signed by Sens. Sherrod Brown, D-Ohio, and Elizabeth Warren, D-Mass., among others.
The executive compensation proposal was required by the Dodd-Frank Act and was initially proposed in 2011 before regulators quietly killed that version of the plan. They released a second stab at a proposal in April which was more stringent, which has received more attention in light of the phony accounts scandal at Wells Fargo, in which 5,300 employees were fired for opening up fake accounts in order to boost their compensation.
Both John Stumpf, Wells' CEO, and Carrie Tolstedt, the executive in charge of community banking, retired early as a result of the scandal, but will still receive millions in compensation.
Senate Democrats objected to that, arguing that the regulators' proposal needs to be able to ensure such a scenario never happens again.
Specifically, the lawmakers called for a longer deferral period on bonus pay, requiring compensation "clawbacks," and broadening the definition of what would trigger a clawback to include risk management failures and employee oversight negligence.
The lawmaker letter said the proposal in its current form is "unlikely to increase Wall Street executive accountability to the degree necessary to deter the kind of misconduct we have seen at Wells Fargo and in numerous other cases."
The letter was signed by Brown, Warren, Sens. Bob Menendez, D-N.J., Tammy Baldwin, D-Wis., Al Franken, D-Minn.; Richard Blumenthal, D-Conn., Barbara Boxer, D-Calif., Richard J. Durbin, D-Ill., Kirsten Gillibrand, D-N.Y., Patrick Leahy, D-Vt., Ed Markey, D-Mass., Jeff Merkley, D-Ore., Jack Reed, D-R.I., Sheldon Whitehouse, D-R.I., and Ron Wyden, D-Ore.
Eleven House Democrats, led by Rep. Maxine Waters, D-Calif., the top Democrat on the House Financial Services Committee, sent a similar letter earlier this month to the financial regulators requesting a stronger executive compensation rule.
The letter was sent to the federal banking regulators as well as the Federal Housing Finance Agency, National Credit Union Administration and the Securities and Exchange Commission.