"Corporate bigwigs and wrongdoers shouldn't be allowed to benefit and enrich themselves when their actions contribute to the downfall of a company. Mismanagement and irresponsibility shouldn't be rewarded," Grassley said. "My bill would make sure there's some kind of equity in terms of who gets left holding the bag when a company goes bankrupt."
The Corporate Accountability in Bankruptcy Act sponsored by Grassley would clarify that bankruptcy trustees could recover bonuses, loans, non-qualified deferred compensation, and any other extraordinary or excessive compensation as determined by the court, made to an insider, officer or director within one year before the date of the bankruptcy petition filing. Furthermore, if securities or accounting violations were committed, trustees could recover the payments within four years of the bankruptcy filing.
Grassley said the legislation is needed because the courts haven't clearly ruled wither the bonuses and excessive compensation of corporate directors are avoidable in bankruptcies of publicly-held companies. Moreover, Grassley said that bankruptcy trustees should be able to reach back more than one year to pull excessive compensation of wrongdoers into the bankruptcy estate. These changes will assist companies in either reorganizing or paying off their debts in bankruptcy.
Grassley filed the same legislation as an amendment to the corporate accountability bill passed in the summer, but it wasn't considered by the bill managers. "There's still time for Congress to act this fall," Grassley said. "This initiative is an important component of my efforts, which also include pension protection legislation, to look out for the employees of big corporations."
As a senior member of the Judiciary Committee, Grassley is a leader on bankruptcy policy issues in the Senate.