The recent failures of a trio of midsize banks has once again raised questions on whether executive compensation is tilted toward short-term gains rather than companies' long-term health.
FILE - People stand outside a Silicon Valley Bank branch in Santa Clara, Calif., on March 10, 2023. The recent collapse of a trio of midsize banks, including Silicon Valley Bank, has once again raised questions on whether executive compensation is tilted toward short-term gains rather than companies' long-term health. The recent failures of a trio of midsize banks has once again raised questions about whether senior executives in the U.S.
Silicon Valley Bank's former CEO Greg Becker received compensation valued at roughly $9.9 million in 2022, and also sold stock in the company only a few weeks before it failed. Joseph DePaolo, CEO of Signature Bank, also sold stock in the company in the years leading up to its collapse. “The recent bank failures prove yet again that banker compensation is at the core of causing banks to take too much risk, act irresponsibly if not recklessly, and blow themselves up,” said Dennis Kelleher, co-founder of Better Markets, which was founded after the Great Recession focused on financial industry reform.
The bill is sponsored by Warren, Josh Hawley, R-Mo., Catherine Cortez Masto, D-Nev. and Mike Braun, R-Ind. The White House, while not endorsing the specific bill, has called on Congress to pass laws to reform how bank CEOs are paid in the event of a failure. Since 2000, the Securities and Exchange Commission has given CEOs and other corporate insiders a way to defend themselves against charges that they bought or sold stock using information unavailable to others, an illegal practice known as insider trading.
Over the years, complaints have risen about insiders abusing some loopholes in the 10b5-1 rule. In December, the SEC announced added amendments to close the loopholes.
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