LIU: BANKS AGREE TO EXPAND CLAWBACKS TO COVER COSTLY MISCONDUCT

NEW YORK, N.Y. –  City Comptroller John C. Liu today announced that
the NYC Pension Funds have reached agreements with Capital One
Financial Corp. (NYSE: COF), Citigroup (NYSE: C), and Wells Fargo &
Co. (NYSE: WFC) to expand their policies on clawbacks to cover
misconduct that causes financial or reputational harm.  The agreements
are in line with a new best practice established last year by three
major banks and further raise the bar on accountability by
strengthening companies’ disclosure of actual clawbacks above and
beyond what may be legally required.
“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,” Comptroller Liu said.
“This is a vital step toward reining in out-of-control executive pay
based on short-term gains.  We commend these banks for strengthening
the link between compensation and business integrity, which is central
to creating long-term value, and for setting new standards of
disclosure.”
All three banks adopted new policies empowering their respective
boards of directors to recover, or “claw back,” incentive pay from
executives who are responsible for misconduct that causes serious
financial or reputational harm to their company, either through their
actions or through a failure to supervise others.  Previously, the
boards could generally only claw back pay from executives who
committed intentional or gross misconduct, a higher threshold that
generally also results in termination, or in the event of a financial
restatement.
The companies are also believed to be the first to adopt policies
regarding disclosure of clawback actions taken, with the strongest
commitment coming from Capital One.  In the event of a clawback,
Capital One will disclose the total amount clawed back in connection
with any event, so long as the underlying event has already been
publicly disclosed to investors.
In a positive step forward, Wells Fargo and Citigroup have committed
to consider disclosure of their clawbacks on a case by case basis.
Wells Fargo’s board “will determine whether and to what extent public
disclosure of information regarding such clawback or recoupment,
including the amount of compensation and the executive(s) impacted, is
appropriate.”  Similarly, Citigroup will consider making public
disclosures whenever a decision has been made to cancel deferred
compensation payable to a senior executive responsible for costly
misconduct.
The NYC Pension Funds and Comptroller Liu had filed shareowner
proposals at the three banks, but withdrew them after the banks’
adopted significant changes to their current clawback policies.  The
banks have each paid hefty fines in recent years to settle allegations
of deceptive or improper business practices. The new policies are
intended to serve as deterrent to future violations company policy or
law.
Background
In 2012, Comptroller Liu and the NYC Pension Funds reached agreements
with Goldman Sachs, JPMorgan Chase, and Morgan Stanley regarding their
clawbacks.   The banks clarified that their clawback policies cover
not just employees who engaged in reckless risk-taking or misconduct
but also their supervisors.
New York City Comptroller John C. Liu serves as the investment advisor
to, custodian, and trustee of the New York City Pension Funds. The New
York City Pension Funds are composed of the New York City Employees’
Retirement System, Teachers’ Retirement System, New York City Police
Pension Fund, New York City Fire Department Pension Fund, and the
Board of Education Retirement System. The New York City Pension Funds
held a combined 20,795,019 shares of Capital One, Citigroup, and Wells
Fargo valued at $867,595,449.42 as of 3/12/2013.
In addition to Comptroller Liu, the New York City Pension Funds’ trustees are:
New York City Employees’ Retirement System: Janice Emery, Mayor’s
Representative (Chair); New York City Public Advocate Bill de Blasio;
Borough Presidents: Scott Stringer (Manhattan), Helen Marshall
(Queens), Marty Markowitz (Brooklyn), James Molinaro (Staten Island),
and Ruben Diaz, Jr. (Bronx); Lillian Roberts, Executive Director,
District Council 37, AFSCME; John Samuelsen, President Transport
Workers Union Local 100; Gregory Floyd, President, International
Brotherhood of Teamsters, Local 237.
Teachers’ Retirement System: Janice Emery, Mayor’s Representative;
Deputy Chancellor Kathleen Grimm, New York City Department of
Education; and Sandra March, Melvyn Aaronson (Chair) and Mona Romain,
all of the United Federation of Teachers.
New York City Police Pension Fund: Janice Emery, Mayor’s
Representative; New York City Finance Commissioner David Frankel; New
York City Police Commissioner Raymond Kelly (Chair); Patrick Lynch,
Patrolmen’s Benevolent Association; Michael Palladino, Detectives
Endowment Association; Edward D. Mullins, Sergeants Benevolent
Association; Louis Turco, Lieutenants Benevolent Association; and, Roy
T. Richter, Captains Endowment Association.
New York City Fire Department Pension Fund: Janice Emery, Mayor’s
Representative; New York City Fire Commissioner Salvatore Cassano
(Chair); New York City Finance Commissioner David Frankel; Stephen
Cassidy, President, James Slevin, Vice President, Robert Straub,
Treasurer, and John Kelly, Brooklyn Representative and Chair,
Uniformed Firefighters Association of Greater New York; John Dunne,
Captains’ Rep.; James Lemonda, Chiefs’ Rep., and James J. McGowan,
Lieutenants’ Rep., Uniformed Fire Officers Association; and, Sean
O’Connor, Marine Engineers Association.
Board of Education Retirement System:  Schools Chancellor Dennis
Walcott; Mayoral: Joseph Lewis, Jeanette Moy, Ian Shapiro, Tino
Hernandez, Judy Bergtraum, Allison Rogovin, and Milton Williams;
Patrick Sullivan (Manhattan BP), Kelvin Diamond (Brooklyn BP), Dmytro
Fedkowskyj (Queens BP), Robert Powell (Bronx BP) and Diane Peruggia
(Staten Island BP); and employee members Joseph D’Amico of the IUOE
Local 891 and Milagros Rodriguez of District Council 37, Local 372. Press Release.