$20 million bonus draws fire in Treasury nomination

Washington Examiner – by Joseph Lawler

Liberal activists upset over the nomination of Antonio Weiss to a top Treasury post aren’t just worried about his investment banking background. They also are raising alarms over the $20 million-plus bonus he would reap from his bank if he took the job.

“That is particularly galling,” said Neil Sroka, a representative for Democracy for America, a progressive political group. The compensation arrangement “shows Wall Street’s direct attempt to buy off someone who’s regulating them,” Sroka said.  

Weiss’ nomination to become Treasury undersecretary for domestic finance is already the subject of controversy thanks to vocal opposition from Sen. Elizabeth Warren, D-Mass.

Warren has sought to portray the nomination of Weiss, the head of global investment banking at Lazard, as representative of undue Wall Street influence in Washington.

But the compensation plan that stands to reward Weiss for taking a Treasury post is generating the most left-wing outrage. The post Weiss would fill has responsibility for regulating banking. By giving an executive a bonus to join a top regulatory agency, critics say, the bank is paying for favorable treatment by the agency.

Bloomberg first reported after Weiss was submitted as a candidate that he stood to make up to $21.2 million from joining the Treasury. Weiss has made $15.4 million over the 23-month span prior to his nomination.

The terms of his contract allow Weiss to recoup unvested income he otherwise wouldn’t have access to, according to Bloomberg, including both stock and deferred pay.

Treasury Secretary Jack Lew’s contract with former employer Citigroup included a similar provision, according to a 2013 report by Bloomberg.

Lew’s unvested pay and equity compensation would be lost if he quit, with an exception if he left “as a result of your acceptance of a full-time high level position with the United States government or regulatory body.”

More companies are including terms of departure that allow for accelerated vestment of pay and equity if they are leaving the industry entirely, said Jeff Visithpanich, a managing director at Johnson Associates, a financial industry executive compensation consulting firm.

Usually, such incentives and unvested stock option plans are included to align the interests of executives with the long-term interests of the company. If an executive is leaving the industry and is on amicable terms with the company, it’s increasingly common for the compensation to be paid out early.

But usually there are restrictions when it comes to an executive leaving for a related field, such as a government position that would involve regulating the firm. “That’s on a gray line there,” said Visitpanich. “Most firms wouldn’t go near that with a 10-foot pole.”

Left-wing groups have tried to draw attention to arrangements that reward bankers for becoming regulators. Most prominently, the AFL-CIO, the nation’s largest federation of unions, sent letters to Wall Street banks in November asking about the extent of accelerated vestment policies for bank executives going through the revolving door into government.

Former Federal Deposit Insurance Corporation Chairwoman Sheila Bair wrote in a Fortune commentary that such arrangements are common among banks, and that “[o]nly in the Wonderland of Wall Street logic could one argue that this looks like anything other than a bribe.”

Such contracts are bound to come under increasing scrutiny during future nominations.

“Frankly, if they need a $20 million incentive, I’d rather they stay away,” Bair wrote.

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