Newspaper article International New York Times

Supporting Public Sector Recruitment

Newspaper article International New York Times

Supporting Public Sector Recruitment

Article excerpt

New scrutiny of the Wall Street practice of accelerating the vesting of shares and deferred pay for executives who leave for government service.

The boards of Wall Street's biggest banks recently received a letter posing a provocative question.

Why, the letter asked, do banks routinely pay out special compensation packages to executives who leave to take government jobs when those packages were intended to retain them?

"Unless the position of these companies is that this is just a backdoor way to pay off a newly minted government official to act in Wall Street's private interests rather than the public interest, it is very difficult to see how these policies promote long-term shareholder value," the letter declared.

The letter, sent by Heather Slavkin Corzo, director of the A.F.L.- C.I.O.'s office of investment, has created a stir within the halls of banks and parts of corporate America. Ms. Slavkin Corzo appears to be preparing to go to war with the banks over the pay policy, already submitting proxy proposals to have shareholders vote against it at the annual meetings of Citigroup and Morgan Stanley, for starters.

But perhaps the A.F.L.-C.I.O., the nation's main union federation, has it backward. Shouldn't we be trying to encourage more public service? And shouldn't other industries adopt similar pay practices to allow our most talented people from the broadest array of backgrounds to participate in government?

At issue is a long-running debate about the Wall Street practice of accelerating the vesting of restricted shares and deferred compensation to executives who leave for a role in government. Usually, executives who leave for a job elsewhere, or decide to retire early, forfeit such payments, which act as an incentive to stay and a penalty for departing.

But that isn't the case for Wall Street executives who join the public sector or, in some cases, take jobs in education or the nonprofit world.

The issue -- which some commentators have tagged as part of the revolving door problem between regulators and the industries they cover -- moved into the headlines recently when Antonio Weiss, a Lazard banker who has been nominated for under secretary of the Treasury for domestic finance, disclosed that his firm would pay him about $20 million in stock and deferred compensation if he were to win confirmation. Mr. Weiss would not be entitled to that money if he were to leave the firm for a rival bank.

"It feels icky," Ms. Slavkin Corzo told me about the compensation policy. "We are looking at this from a shareholder perspective," she added, allowing that she's "open to the other side. We are asking questions. They are fair."

However, when I asked her if she could imagine an explanation that didn't involve the equivalent of bribery, as she previously suggested, she seemed less open to other possibilities. …

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