Three more top banks, including Citigroup Inc. ( C ), will expand the reach of clawbacks for executive pay when things
go wrong, increasing to six the number of leading financial companies that have bowed to pressure from New York City's
And Comptroller John C. Liu appears to have broken new disclosure ground in his latest round of shareholder activism,
with Capital One Financial Corp. ( COF ) agreeing to make public the total dollar amount of pay it claws back.
The sixth-largest U.S. bank will disclose how much it recouped from errant workers, so long as the event that
triggered the collection has been publicly disclosed in regulatory filings. It is believed to be the first company to
agree to disclose clawback dollar amounts.
The agreements comes after four months of negotiations with the comptroller, overseer of $127.5 billion of pension
funds, which has made clawbacks a priority for the second year in a row.
In addition to Capital One and Citigroup, Wells Fargo & Co. ( WFC ) also agreed to broaden clawback policies to cover
misconduct that causes financial or reputational harm, although the Citi and Wells changes are less expansive than
The new policies also cover supervisors, similar to agreements New York City's pensions struck last year with Goldman
Sachs Group Inc. ( GS ), Morgan Stanley ( MS ) and J.P. Morgan Chase & Co. ( JPM ).
Clawbacks have taken on added scrutiny nearly a year since J.P. Morgan took a $6.2 billion trading hit in what has
become known as the "London Whale" blunder.
J.P. Morgan clawed back two years of total annual compensation, including restricted stock and canceled options
grants, from three London-based managers who had direct responsibility for the trading portfolio at the heart of the
losses, and Ina Drew, the executive who ran the chief investment office where the losses occured, volunteered to return
her pay to the clawback maximum.
The bank has also clawed back other employee pay but hasn't disclosed details or the dollar amounts for any of the
Before the London Whale there weren't many known cases of clawbacks in the financial sector. The Dodd-Frank financial
reforms broadened the clawback rules instituted in the 2002 Sarbanes-Oxley Act, which gave companies the power to recoup
pay from top executives after a financial restatement or certain misconduct.
In February 2012, UBS AG clawed back 50% of share-based bonuses awarded in 2011 to investment bankers whose bonuses
exceeded $2 million. That followed a trading scandal that cost $2.3 billion and pushed UBS to a $1.3 billion loss for
Mr. Liu's office has been pressing banks to disclose when and how much they claw back. Capital One is believed to be
the first company to specifically agree to do so, he said. Citi and Wells Fargo agreed to consider disclosure on a case
by case basis.
"The new policies will give boards the power to hold executives financially accountable for costly misconduct,
including misconduct by those they supervise," Mr. Liu said in a statement. "We commend the three banks for adopting
stronger clawback provisions and for recognizing that, absent disclosure, shareowners have no way to know whether and
how their boards actually use their new clawback authority."
Mr. Liu's office began negotiations with Capital One, Citi and Wells Fargo last Fall after detailing plans to file
shareholder proposals for each of their proxies. Those proposals have been withdrawn following the agreements, which are
expected to be announced on Thursday.
Spokesmen for Capital One and Citi declined to comment.
Wells Fargo said the comptroller's proposal was "consistent with our thinking on the subject, and we appreciate the
productive dialogue we had with our shareholder." It added, "additional information about our compensation policies and
practices will be included in our 2013 proxy statement."
New York City's pensions hold 1.6 million shares of Capital One, 7.4 million shares of Citi and 11.7 million shares of
Wells Fargo, worth $87.4 million, $347.5 million and $430 million, respectively, as of Wednesday's market close.
The pensions include 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.
Capital One's previous clawback provisions covered only its top executive officers and triggered only in the event of
a financial restatement or willful misconduct. Its new policy covers conduct of the firm's 12 executive officers and
also holds them accountable for events that occur under their chain of command, including misconduct that violates the
law or company policy that causes significant financial or reputational harm.
Citi's revised clawback policy recoups pay where executives are responsible for material financial or reputational
harm, either through their own actions or in failing to supervise others. Clawbacks extend to a deferred cash
compensation plan for 4,000 Citi employees and an equity award plan for top executives.
Citi's previous clawbacks focused on taking back pay in the event of a material restatement of financial results,
knowingly providing inaccurate information relating to financial statements, material violations of risk limits or
termination for gross misconduct.
Wells Fargo's revised policy takes back unpaid compensation awards in the event of misconduct, material error, failure
to supervise or in the event the company or an individual executive's business group has a material downturn in
financial performance or failure of risk management.
Wells's previous clawback provisions recouped incentive pay based on materially inaccurate financial statements or
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