Financial crisis inquiry head says Lehman pay was unconscionable
WASHINGTON -- The head of the commission that investigated the financial crisis said the nearly $700 million that Lehman Bros. awarded to its 50 highest-paid employees in 2007 was unconscionable and should spark policymakers to reexamine executive compensation rules.
“It never ceases to amaze me,” said Phil Angelides, chairman of the Financial Crisis Inquiry Commission. “You clearly have corporate leadership that’s out of control, reckless without accountability and, in the course of driving the firm over the cliff, they’re taking as much money as they can out of it.”
He said the Lehman compensation disclosed Friday by the Los Angeles Times was stunning given the mounting problems for financial firms in 2007 as the housing market was collapsing.
“Here you have the market dissolving and this firm is going gangbusters, and as part of it is awarding these outsized compensation packages,” Angelides said. “In that context, to take this kind of money out of the firm when you know the kind of risks that lay ahead, it’s unconscionable.”
The huge compensation packages were emblematic of Wall Street’s excesses leading up to the 2008 financial crisis, and in Lehman’s case constituted “a looting of the firm” by its top officers and employees, he said.
Stronger regulatory oversight of compensation at financial companies is needed, Angelides said.
Policymakers in the past have found it hard to put caps on pay, with companies finding ways around specific dollar limits. But regulators could do more oversight on the structure of compensation packages and could require that more employee pay be disclosed to shareholders.
The Dodd-Frank financial reform law included several provisions to try to limit executive compensation, including a requirement that public companies get shareholder approval for executive compensation plans.
“This should be a wake-up call for an examination of practices to see if say on pay and the Dodd-Frank provisions are enough or whether there needs to be a deeper oversight by regulators,” Angelides said.
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