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.
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.