(Updates with bank comments starting in seventh paragraph.)
March 14 (Bloomberg) -- Citigroup Inc., Wells Fargo & Co. and Capital One Financial Corp. agreed to change their pay policies to make it easier to recover compensation from executives involved in misconduct.
Employees responsible for serious financial or reputational harm to a company as well as their supervisors are now subject to pay clawbacks under agreements the three banks reached with New York Comptroller John C. Liu, the city official said today in a statement. The policies are similar to a deal Liu reached last year with Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co., according to the statement.
“Executives need to be held financially accountable for misconduct that harms the company, and that includes improper behavior and reckless risk-taking by those they manage,” Liu said in the statement. “This is a vital step toward reining in out-of-control executive pay based on short-term gains.”
Previously the three banks only permitted clawbacks from executives who committed intentional or gross misconduct, according to the statement.
Liu filed shareholder proposals with each of the three banks and later withdrew them after the companies adopted changes to their compensation policies. The lenders have each paid fines in recent years to settle allegations of deceptive or improper business practices, according to today’s statement.
Capital One, based in McLean, Virginia, will disclose the total amount clawed back as long as the circumstances have already been publicly disclosed, according to the statement. San Francisco-based Wells Fargo and Citigroup, which is based in New York, agreed to consider disclosing the amount of pay recouped.
The proposal is “consistent with our views on the subject and we appreciate the productive dialogue we had with the proponent,” Bridget Braxton, a spokeswoman for Wells Fargo, said today in an e-mailed statement. “Our compensation policies and practices are based on principles that focus on paying for performance, attracting and retaining top executive talent, fostering a culture of risk management and aligning management’s interests with stockholders’ interests.”
Spokesmen for Citigroup and Capital One declined to elaborate on the agreement.
--Editors: Steve Dickson, Dan Kraut