It would be better to have the clawbacks mandated and enforced by regulation rather than be left up to the bank's "self-regulating" capabilities that have failed so miserably in the past. The only "bleakness" in the clawbacks is that they haven't taken place in the past and should be publicly disclosed and strengthened in the future.
On 'Bleak' Street, Bosses in Cross Hairs
By Liz Moyer - The Wall Street Journal/Business
Wall Street's bleak bonus season just got bleaker at Goldman Sachs Group Inc. and Morgan Stanley, where it is becoming clear that traders aren't the only ones at risk of having their pay taken back. Their bosses are on the hook, too.
The Wall Street securities firms said they would seek to recover pay from any employee whose actions expose the firms to substantial financial or legal repercussions. The firms said the policy isn't new, but the disclosure shows the companies won't just go after the excessive risk-takers if bad trades hurt the firms' profits. The latest disclosures clarify for the first time that managers are on the line.
The companies disclosed the clawback policies separately in Securities and Exchange Commission filings in late January and early February, in connection with agreements they reached to end proxy fights being waged by the office that runs New York City's pension funds.
New York City Comptroller John Liu filed papers last year seeking to force the firms to strengthen their clawback policies.
The move comes at a touchy time on Wall Street, where pay is in decline after a year of mixed financial performance and stock-price declines. At Goldman Sachs, compensation and benefits dropped 21% from a year ago to $12.22 billion, taking per capita pay and perks down to $367,000, a level last seen in the financial crisis. The firm cut 2,400 jobs last year, joining roughly two dozen firms around the globe that plan to shed more than 100,000 positions.
"These two firms have set the standard for clawback policies in the banking industry," said Mr. Liu in a statement Tuesday. "We appreciate the dialogue we've had on this issue and will continue to call for them to disclose the amount of clawbacks if forthcoming regulation does not require it."
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"Goldman and Morgan Stanley clarified for the first time that managers are also on the line when firms seek to recover pay under 'clawback' policies."
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