Schumer to Obama: 'Significantly revamp corporate governance'

Schumer to Obama: 'Significantly revamp corporate governance'

Sen. Charles SchumerCharles (Chuck) Ellis SchumerDemocrats now attack internet rules they once embraced Schumer: Trump budget would ‘cripple’ gun background checks Schumer: Senate Republicans' silence 'deafening' on guns, Russia MORE (D-N.Y.), one of Wall Street’s most consistent supporters, is nudging the Obama administration to go further in its effort to restrict executive pay and reform financial firms that received public bailout funds.

In a letter Thursday to the administration’s “pay czar,” Kenneth Feinberg, Schumer endorses Feinberg’s announcement Thursday that salaries to 175 executives at seven companies would be cut by 90 percent over their 2008 levels.

But Schumer also wants Feinberg to force the seven companies to “significantly revamp their corporate governance across the board” to prevent conflicts of interest and other practices at the board of directors level.

A longtime protector of the financial industry, Schumer told The Hill the economic meltdown changed the rules for Wall Street.

“We’re in a different world here, and if you get bailout money the same practices can no longer continue to exist, period,” he said.

Schumer’s letter reads, “While reigning [sic] in compensation practices at these firms is certainly necessary to ensure that taxpayer money is well spent and not squandered on lavish pay, executive compensation is just the tip of the iceberg when it comes to the practices that so recently put our entire financial system at risk.

“These companies are the poster children for the total breakdown in corporate governance and lack of effective board oversight that contributed to the recent crisis, and I believe these reforms are critical if the government is serious about turning these companies around, returning them to private sector ownership and ensuring they participate in the markets as responsible corporate citizens.”

Specifically, Schumer points to his “Shareholders' Bill of Rights” legislation that he introduced in May with Sen. Maria CantwellMaria Elaine CantwellDemocrats request info on 'repeated environmental concerns' at Ohio pipeline Booker to stop accepting donations from corporate PACs Gillibrand vows to refuse donations from corporate PACs MORE (D-Wash.). The bill requires: companies to allow shareholders a greater role in nominations to a company’s board of directors; board members to be annually reelected; board members to receive at least 50 percent of a vote in uncontested elections, and public companies to create a separate “risk committee" with an independent board.

Feinberg plans to cap a months-long review process by announcing the cuts — along with new restrictions on corporate luxuries such as use of private jets, chauffers and even country club membership — at five financial firms and two auto companies. The seven companies are AIG, Bank of America, Chrysler, Chrysler Financial, Citigroup, General Motors and GMAC.

Schumer and Feinberg are both Brooklyn natives and longtime friends. A former chief of staff to the late Sen. Edward Kennedy (D-Mass.), Feinberg chaired the Sept. 11 Victims Compensation Fund and often worked with Schumer.

Senate reaction to Feinberg’s plan mostly broke along party lines, with Democrats supporting the idea and Republicans arguing against government intervention in the private market. There was one notable exception: Sen. John McCainJohn Sidney McCainLawmakers worry about rise of fake video technology Democrats put Dreamers and their party in danger by playing hardball Trump set a good defense budget, but here is how to make it better MORE (R-Ariz.), Obama’s 2008 rival for the presidency, said he supported the administration.

“I have no problem with greed being curtailed,” McCain said.

Most Republicans said just the opposite.

“I have a visceral reaction against so much government involvement in free enterprise,” said Senate Republican Conference Chairman Lamar AlexanderAndrew (Lamar) Lamar AlexanderOvernight Health Care: Trump health chief backs CDC research on gun violence | GOP negotiators meet on ObamaCare market fix | Groups sue over cuts to teen pregnancy program GOP negotiators meet on ObamaCare market fix 30 million people will experience eating disorders — the CDC needs to help MORE (Tenn.)

“It’s a bad precedent,” said Sen. Pat RobertsCharles (Pat) Patrick RobertsOvernight Finance: Lawmakers, Treasury look to close tax law loopholes | Trump says he backs gas tax hike | Markets rise despite higher inflation | Fannie Mae asks for .7B Senators working on fix to agriculture provision in GOP tax law Trump budget would slash crop insurance funds for farmers MORE (R-Kan.). “You have government determining the pay of a company that may be in the business of trying to get the best employees they can to save the company. It’s very competitive out there. I’m not waving flags for people to get excessive pay or golden parachutes — what I object to is the government making that decision.”

Some Republicans are more ambivalent.

“There’s no question we’re way too involved in these companies, but on the other hand these companies are on the taxpayer dole,” said Sen. Bob CorkerRobert (Bob) Phillips CorkerCongress punts fight over Dreamers to March Drama surrounding Shulkin — what is the future of VA health care? Blackburn pushes back on potential Corker bid: 'I'm going to win' MORE (Tenn.). “Hopefully the outcome of all this is that companies are very wary about becoming involved with the federal government.”

In March, Schumer led the charge to force AIG to return most of $165 million in taxpayer money that the firm spent on executive bonuses. In a floor speech and in comments to reporters, Schumer threatened to push through a law to tax the bonuses at up to 100 percent.

“To those of you getting these bonuses, be forewarned: you will not keep them,” Schumer said on the Senate floor.

Two days later, the House voted 328-93 for a 90 percent tax on bonuses awarded by corporations receiving more than $5 billion in bailout funds, aimed at executives who make $250,000 or more in total household income and bonuses paid or scheduled to be paid after Dec. 31, 2008. The Senate version of the bill levied a 70 percent tax.

The controversy dissipated within days, as 15 of the 20 highest-paid AIG executives agreed to return the bonuses.