Strange things happen occasionally. Frogs rain from the sky, ships disappear without a trace in the Bermuda Triangle, rivers flow backward, a union president pens a good article protesting a crony capitalist practice in the Wall Street Journal.
Granted, Richard Trumka isn’t turning the spotlight on himself or on his union brothers who know how to play the crony game quite well. But his argument in the attached article is a good one. Executives shouldn’t be paid extra bonuses if they leave industry and enter “public service.” At the very least shareholders should be able to vote on whether such bonuses should be awarded.
(From The Wall Street Journal)
Golden parachutes are controversial, but companies defend them as a way to retain executives who otherwise might resign during a change in control. However, a new and outrageous wrinkle has gained increasing prominence on Wall Street: the acceleration of equity awards for executives who voluntarily resign to enter government service.
Past recipients of government golden parachutes from large financial institutions include Treasury Secretary Jack Lew (Citigroup), U.S. Trade Representative Michael Froman (Citigroup) and Undersecretary for International Trade at the Department of Commerce Stefan Selig ( Bank of America ).
Government-service golden parachutes raise troubling questions. How do Wall Street banks benefit from giving their executives a financial incentive to enter government service? Do they expect to receive favorable government treatment from their former executives? And if not, why should bank shareholders be asked to bear the cost of such golden parachutes?