With the Democrat Presidential Primary race in full-swing, bills addressing executive compensation are seeing increased attention and frequency. Within the past few weeks, key Democrat Candidates for President, including Massachusetts Senator Elizabeth Warren and Hawaii’s Representative Tulsi Gabbard have introduced bills aimed at a core Democrat priority – Wall Street and corporate accountability.
- The Stop Wall Street Looting Act (S. 2155): Introduced by Senators Elizabeth Warren (D-MA), Bernie Sanders (I-VT), two other Presidential candidates, as well as the four progressive House members known collectively as “The Squad”, the legislation would “will fundamentally reform “the private equity industry” and level “the playing field by forcing private equity firms to take responsibility for the outcomes of the companies they take over.” The bill calls for restrictions “against executive payments to include any incentive compensation, bonus, or severance payment to senior executives, any of the next 20 most highly compensated employees, consultants of the company, and department or division managers of the company.” Notably, bankruptcy courts would be prevented from approving executive severance pay if severance pay has not been paid to employees. The bill also would prevent courts from approving reorganization plans where executives receive payments that are "disproportionate in light of any economic concession made by the nonmanagement workforce" of the company during bankruptcy.
- The Wall Street Banker Accountability for Misconduct Act of 2019 (H.R. 3885): Introduced by Rep. Tulsi Gabbard (D-HI), this bill follows the framework of several shareholder proposals seen at financial services industries over the last few years and would require regulated banks and financial services companies to create a “Deferment Fund” into which bank “senior employees” - broadly defined by the bill to include a wide range of individuals including anyone who makes over 10 times the compensation of the median-paid employee - would be required to defer "at least 50 percent of the amount that the employee’s total compensation for the year exceeds 10 times the compensation of the median paid employee of the consolidated bank holding company for the year.”
- The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act (S.2268): While the performance-based pay exemption to 162(m) was repealed in the Tax Cuts and Jobs Act of 2017, Senator Jack Reed along with several notable co-sponsors, including Senator Warren, have re-introduced an updated “Stop Subsidizing Multimillion Dollar Corporate Bonuses Act” to “extend section 162(m) to all employees of publicly traded corporations so that all compensation is subject to a deductibility cap of $1 million.“ Calling the legislation a “matter of fairness”, Senator Reed stated his bill would prioritize tax breaks for the middle class by ensuring corporations – and not “hardworking taxpayers who face their own challenges in this economy” are the ones paying executive bonuses.
The bills will not make it past the Republican-controlled Senate. However, they provide a preview of the legislation which would be seen if one of the Democrat Candidates running for President wins in 2020.