Washington, DC – Today U.S. Senators Sheldon Whitehouse (D-RI), Richard Blumenthal (D-CT), and Claire McCaskill (D-MO) introduced legislation to keep companies that receive future government bailouts from using taxpayer dollars to pay deferred compensation to corporate executives. The No Windfalls for Bailed Out Executives Act (S. 2546) would require deferred compensation plans to include so-called “claw-back” provisions preventing such pay-outs in the event of a federal bailout.
“American taxpayers should never again be on the hook for lavish pay packages at bailed-out firms,” said Whitehouse. “I have a hard time explaining to Rhode Islanders why the guys who ruined the economy a few years ago got golden parachutes instead of prison jumpsuits. This simple fix will make sure that never happens again.”
“This bill would ensure that the American people are not on the hook for golden parachutes to failed executives when their companies need bailouts. A taxpayer-funded bailout is a last resort to protect jobs and our economy, not a slush fund. Using this targeted funding to pad pockets and pay executives is unconscionable, especially while wages for working Americans are barely keeping pace with inflation,” said Blumenthal.
“Taxpayers should never have to foot the bill for millionaire and billionaire executives in the private sector,” said McCaskill. “Taxpayers paid for these bonuses and this bill would prevent that nonsense.”
In response to the financial crisis of 2008, Congress authorized the Troubled Asset Relief Program (TARP), a $700 billion bailout fund for financial institutions. Many of the firms that received these funds continued to pay out deferred compensation to top executives—some of whom helped precipitate the financial crisis. Had the firms collapsed, their deferred compensation would have been an unsecured obligation, likely not recoverable in bankruptcy. The taxpayer bailout effectively restored these tax-sheltered funds to the executives. The amount of deferred compensation at the largest firms, accumulated during the financial bubble and delayed for tax planning purposes, totaled at least $40 billion, according to an analysis by the Wall Street Journal.
The No Windfalls for Bailed Out Executives Act would amend the part of the Tax Code that governs deferred compensation plans to require that plans provide for the claw-back of deferred compensation earned within 36 months prior to the receipt of federal bailout funds. This requirement would cover officers, board members, and employees earning over $1 million per year.
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All official press releases from Sen. Sheldon Whitehouse (D-RI)
