Senator Elizabeth Warren took Wells Fargo CEO John Stumpf to task yesterday, and she pointed out that nothing will change on Wall Street or in the boardrooms of th US’s banks until we start prosecuting executives who oversee fraud.
She’s right, but to avoid scandals like this one, we also need to fundamentally change the way that corporate executives get paid.
Ever since the Reagan administration, instead of actually investing in research and development or raising workers’ wages, corporate executives have focused more and more on inflating a company’s stock prices and dividends.
This is because, over that same time, changes in the tax code made it so that CEOs like Stumpf are better off getting most of their income from so-called “performance based pay”, also known as stock options.
Between the “shareholder revolution” of the 1980s and the changes to how executives can be paid, our economy is now riddled with perverse incentives that distort the values and priorities of American businesses.
And Wells Fargo CEO John Stumpf is proof.
Earlier this month, Wells Fargo settled with a Los Angeles prosecutor and with federal regulators who accused the bank of opening more than 2 million checking and credit accounts for customers, without the customers’ knowledge!
And while Stumpf has repeatedly claimed to be accountable for the scandal, he hasn’t DONE anything to make himself, or any of the other senior executives, accountable for this massive scandal.
“Did you fire any of those people? […] No. OK, so you haven’t…