AFL-CIO President Demands End to Golden Parachutes
According to a report on TheHill.com, American Federation of Labor and Congress of Industrial Organizations ("AFL-CIO") President Richard Trumka demanded that Wall Street end the practice of giving "golden parachutes" to executives leaving for government jobs. In a letter to six top banking executives, Trumka argued that it should "not take the passage of a law defining them as bribery under the U.S. criminal code for you to do the right thing and stop offering them."
Senator Tammy Baldwin (D-WI) and Representative Elijah Cummings (D-MD) introduced legislation in July that would ban government-service bonuses to end what Trumka calls "a highly controversial and dubious practice."
Commentary
As for the conduct outlawed by the Baldwin-Cummings bill, which has drawn the most attention, "the acceleration of equity awards for executives who voluntarily resign to enter government service": this is literally an example of no good deed going unpunished. Banks typically defer 40%-90% of an executive's annual pay, usually for 3-5 years. If that executive leaves voluntarily, that executive forfeits that deferred pay. If that executive leaves to be employed by another bank, the new employer usually makes that executive whole by granting equity and cash equal to the forfeited deferred pay. Banks (and other companies), so as not to deter public service, have not forfeited the deferred pay of employees who leave to go into public service. They generally cash out the stock and accelerate payment so the executive no longer has company stock and the company is no longer holding any of the executive's money when he or she goes to work for the government. Banks should be applauded for this practice, without which almost no executive would ever leave to work for the federal government. But, that seems to be the point of the Bill: to build a wall between the public sector and the private sector, and make sure no one from the private sector dares, or can afford, to climb that wall.