CEOs at bailed out banks got $13.8 million apiece last year

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CEOs at bailed out banks got $13.8 million apiece last year
By Andre Damon
7 September 2009

Executives at financial firms bailed out by the government received on
average $13.8 million in compensation last year, according to a study
of bank earning statements released last week.

This figure is 37 percent higher than the average CEO income in the
S&P 500, which stood at $10.1 million last year. The study found that
CEOs stand to benefit even further after their companies granted them
stock options at their low points in early 2009.

The study, published Wednesday by the Institute for Policy Studies, a
liberal think tank, gave a comprehensive overview of Wall Street
firms’ pay practices based on their proxy earnings statements to the SEC.

The report noted that the average financial CEO’s salary in 2008 was
430 times what an average worker earned during the same time.

The top five executives at the 20 financial firms that got the most
money from the federal government collected a total of $3.2 billion in
compensation in the past three years. During this time, these 100
people took in an average of $32 million apiece. This group received
$1.2 billion in 2006 and 2007, and $0.8 billion last year.

100 US workers would have to work for a thousand years to make as much
as this group made in three.

The report notes that “Executive pay at top US financial firms stands
poised for spectacularly rapid recovery.” Many Wall Street firms gave
executives large quantities of stock options in the beginning of the
year, when stocks were at bottom prices. But as a result of the
bailout and the Obama administration’s continued guarantees that it
would compensate banks for any losses they incur, these stocks have
drastically shot up in value.

Half of the top 20 firms receiving bailouts have already reported the
details and valuations of stock options given earlier this year. The
top five executives at each of these firms had the value of their
stock options increase by a total of $90 million. Executives at
JPMorgan Chase had their options grow by $20.6 million, followed by
American Express and PNC, each of whose executives had their options
grow by $17.9 million. If the rally continues, these people stand to
earn far more.

Sarah Anderson, the report’s author, told Newsweek, “I think the most
shocking thing was looking at how executives could use the financial
crisis as a springboard to an even bigger windfall this year. Rather
than hand out bonuses, many companies gave out new stock options. For
example, the stock options of American Express’s CEO increased by $18
million, but the stock price of the company was about half since the
economic crash. I think this shows that executives come out on top no
matter what.”

Executive bonuses are expected to increase by 25 percent this year,
according to the Wall Street Journal. Goldman Sachs alone has already
allocated $11 billion for employee compensation in the first part of
the 2009.

“The federal government has, to this point, not moved forward into law
or regulation any measure that would actually deflate the executive
pay bubble that has expanded so hugely over the last three decades,”
the study concluded.

This is a striking admission, but one that is absolutely true. For all
its talk of reigning in executive compensation, the Obama
Administration has taken no concrete measures to reduce the actual
quantity of funds doled out to executives.

The closest thing to such a measure has been the appointment of
Kenneth Feinberg to approve the pay packages of firms receiving some
forms of government aid. Feinberg has the power to vote up or down the
pay packages for the top 100 employees at these companies. But this
limited oversight applies only for companies that still owe the US
government money from the Troubled Asset Relief Program.

So far, eight of the top 20 receivers of government funds have paid
back their TARP obligations, freeing themselves from any pay
oversight. In any case, Feinberg has already approved “in principle”
multi-million-dollar bonuses at failed insurer AIG. Feinberg is
expected to release the results of his investigation later this month.

In another toothless measure, Congress has mandated that large
financial firms conduct non-binding shareholder votes on executive pay
packages.

The response from the media has been a mixture of feigned outrage and
cynical acceptance. David Weidner wrote in a Wall Street Journal
column Thursday, “It’s futile to try and eliminate risk-taking and big
rewards on Wall Street. Greed is the nature of the business. Capping
Wall Street pay is like telling Apple Inc. to be less innovative or
Wal-Mart Stores Inc. to go easy on the discounts.” Instead, he argues
that CEO pay should be better aligned with their companies’ interests.

This has been the nominal line of the Obama administration, which has
on principle rejected any comprehensive restraints on CEO pay. At the
G20 finance ministers’ meeting, which concluded talks on Saturday,
France and Germany sought to create some sort of global oversight for
pay in the financial industry, but US Treasury Secretary Tim Geithner
rejected any such approach, calling instead for token regulations on
the amount of capital that banks are required to hold.

It is clear that far from seeking to reign in executive pay, the Obama
administration has done everything in its power to defend the
exorbitant compensation of the Wall Street CEOs.

http://www.wsws.org/articles/2009/sep2009/exec-s07.shtml

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