Barney Frank Pushes Bill To Ensure Financial Executives Lose Pay For Irresponsible Practices

By Ashley Portero | May 30 2012 5:04 PM

House Democrats, led by Rep. Barney Frank of Massachusetts, want to ensure that financial executives are held personally responsible for corporate wrongdoing by hitting them where it hurts -- their wallets.

Reuters

Former Massachusetts Congressman Barney Frank was faced with accusations that he hired male prostitute Steve Gobie for sex in 1985 when Frank, who later came out as gay, was still in the closet. Gobie came forward with the story to The Washington Times and a congressional investigation was launched, but the committee found no wrongdoing on Frank's part. He went on to win re-election and served Massachusetts for 31 years. Frank said he would not seek another term this year.

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A new bill penned by Frank, the ranking minority member and former chairman of the House Financial Services Committee, would prohibit financial executives from obtaining insurance policies that protect their paychecks. The provisions are aimed at making sure that executives cannot benefit from income that may have been made by breaching federal regulations, a move proponents argue would help protect the financial industry from irresponsible practices that maximize executive earnings, but hurt companies -- and investors -- in the long run.

The Dodd-Frank Financial Reform Law already includes measures requiring corporate executive compensation to be clawed back when a firm is determined to have flouted federal regulations, so their pay falls in line with what the company actually brought in. But now Frank wants to make sure executives cannot shield that income through insurance policies or other forms of hedging.

The creation of insurance policies to insulate financial executives from claw-backs is one more effort by some in the industry to perpetuate a lack of accountability, Frank said, according to The Hill.

The bill has been co-sponsored by Democratic Reps. Henry Waxman of California, the ranking member of the House Energy and Commerce Committee, and Collin Peterson of Minnesota, the ranking member of the House Agriculture Committee.