Published in The Washington Post December 22, 2009 by Brady Dennis
When word spread earlier this year that American International Group had paid more than $165 million in retention bonuses at the division that had precipitated the company’s downfall, outrage erupted, with employees getting death threats and President Obama urging that every legal avenue be pursued to block the payments.
New York Attorney General Andrew M. Cuomo threatened to publicize the recipients’ names, prompting executives at AIG Financial Products to hastily agree to return about $45 million in bonuses by the end of the year.
But as the final days of 2009 tick away, a majority of that money remains unpaid. Only about $19 million has been given back, according to a report by the special inspector general for the government’s bailout program.
Some of the employees who had offered to return their bonuses have instead left the company, taking their cash with them.
Others remain at Financial Products but are also holding on to their money until they see what Kenneth R. Feinberg, the Obama administration’s “compensation czar,” decides about whether they should get future bonus payments they have also been promised. Feinberg, AIG and government officials have been involved in ongoing negotiations over the status of past and future bonuses at the insurance giant.
Posts Tagged ‘Executive bonuses’
AIG executives’ promises to return bonuses have gone largely unfulfilled
Checking on Risky Pay
Published in CFO December 18, 2009 by. Alix Stuart
If a compensation policy could be harmful to a company’s health, the Securities and Exchange Commission wants investors to know about it.
This week the regulator approved a laundry list of new disclosure rules that will apply to virtually all proxy statements issued next year. The centerpiece of the new rules is a mandate that companies explain the risks that their compensation practices pose if they are “reasonably likely to have a material adverse effect on the company.”
A carryover from the requirements originally imposed on recipients of the Troubled Asset Relief Program, the rule says companies must consider compensation risk for all employees, not just executive officers. “Accountability is impossible without transparency,” said SEC Chairman Mary L. Schapiro in a press release accompanying the decision.
Bank Bonuses: The ‘Fat Cats’ Try to Look Slimmer
Published in Business Week December 16, 2009, by Ian Katz and Christine Harper
December has been tough for the global banking elite. First Britain’s Chancellor of the Exchequer, Alistair Darling, slapped a 50% tax on bonuses paid to bankers. Then, days later, President Barack Obama chided “fat-cat bankers” on national television in the U.S. On Dec. 14, Wall Street began cranking up its PR machine to contain the damage, sending U.S. Bancorp (USB) CEO Richard Davis—a lesser-known, lesser-paid member of its ranks—to address reporters in Washington. America’s top bankers, he said, “agreed very much” with the President “on the principles of executive compensation,” adding that they “are looking forward to you seeing the good efforts we’ve taken in the last couple of months.”
Bank Bonuses: The ‘Fat Cats’ Try to Look Slimmer
Pubished in Business Week December 16, 2009, by Ian Katz and Christine Harper
December has been tough for the global banking elite. First Britain’s Chancellor of the Exchequer, Alistair Darling, slapped a 50% tax on bonuses paid to bankers. Then, days later, President Barack Obama chided “fat-cat bankers” on national television in the U.S. On Dec. 14, Wall Street began cranking up its PR machine to contain the damage, sending U.S. Bancorp (USB) CEO Richard Davis—a lesser-known, lesser-paid member of its ranks—to address reporters in Washington. America’s top bankers, he said, “agreed very much” with the President “on the principles of executive compensation,” adding that they “are looking forward to you seeing the good efforts we’ve taken in the last couple of months.”
But a close look at Goldman Sachs’ (GS) recent maneuvers shows that some of the changes in pay practices on Wall Street are more stylistic than substantive. Goldman, the target of so much animus in recent months, has led Wall Street’s charge to get back in Main Street’s good graces; on Dec. 10 the firm announced it would pay its top 30 executives annual bonuses solely in restricted stock that can’t be sold for five years.
“We knew we took risks. When things came out against us, we had no cause for complaint.” Robert Frost (paraphrased)
Expert Perspective by Grahall’s OmniMedia Editorial Board
In their December 4, 2009 article for Financial Times, (Goldman looks to quell anger on bonuses) authors Justin Baer, Francesco Guerrera, and Tom Braithwaite say: “Top Goldman Sachs executives are likely to receive their annual bonus in stock this year rather than cash as part of a pay review that could affect thousands of the Wall Street bank’s rank-and-file employees.” But what does that really mean for Goldman’s executives and Goldman’s investors?
Continue reading ““We knew we took risks. When things came out against us, we had no cause for complaint.” Robert Frost (paraphrased)” »
Goldman Blinks on Bonuses
Published in The Wall Street Journal December 10, 2009 by Susanne Craig
Goldman Sachs Group Inc., moving to defuse public outrage over its pay, said its top 30 executives will receive no cash bonuses for 2009 despite the firm’s expected record profits.
Thursday’s announcement was the biggest concession yet by Goldman in response to the criticism of its compensation barely a year after the New York company received $10 billion in taxpayer-funded aid. Instead of a mix of cash and stock, Chairman and Chief Executive Lloyd C. Blankfein and the rest of Goldman’s management committee will be awarded only stock that can’t be sold for five years.
But the changes are only for 2009 and don’t necessarily affect more than 31,000 other Goldman employees, consultants and temporary workers. That group includes traders and other employees who are fueling most of this year’s revenue and profit surge, putting them in line for sharply higher bonuses early next year. In addition, Goldman gave no indication in its announcement that it will buckle to pressure to rein in overall pay levels.
Goldman Bows to Pressure Over Pay
Published in The Wall Street Journal, December 10, 2009
Goldman Sachs Group Inc. on Thursday said its top 30 executives won’t receive a cash bonus for 2009 as the Wall Street bank bows to public pressure about runaway compensation packages.
The move approved by Goldman’s board is an attempt to quell public criticism about multimillion-dollar bonus packages expected to be doled out this year. The firm’s 31,000 employees are on track to earn an average of more than $700,000 apiece this year, the most in its 136-year history.
Investors will also get a say on pay: Goldman said shareholders will get an advisory vote on the company’s compensation policies. The firm has been in private discussions with major investors during the past several weeks in an effort to ward off backlash over its record compensation pool.
Goldman Taking ‘Hard Look’ at Pay, Board Member Says
Published in Bloomberg December 9, 2009 by Erik Schatzker and Michael J. Moore
Goldman Sachs Group Inc., the most profitable firm in Wall Street history, is taking a “very hard look” at whether to pay people less because of public outrage over bonuses, board member William George said.
Goldman Sachs set aside 47 percent of revenue for compensation and benefits through the third quarter, enough to pay each employee more than $500,000 for nine month’s work. George, a professor at Harvard Business School who sits on the New York-based bank’s compensation committee, said the board may lower the percentage this year and in the future.
“I think that’s up to the compensation committee to decide, but I think they are going to take a very hard look at it,” George said in an interview today on Bloomberg Television. “There is so much anger out there and I’m not quite sure how to ameliorate that, other than to moderate things and to recognize that Goldman and every other firm benefited from the actions of the Federal Reserve Board and the Treasury Department.”
We Won’t ‘Mintz’ Words
Expert Perspective by Grahall’s OmniMedia Editorial Board
The November 30, 2009 Wall Street Journal ran an article by Henry Mintzberg, professor at the Desautels Faculty of Management at McGill University in Montreal titled No More Executive Bonuses! The problem isn’t that they are poorly designed. The problem is that they exist.
Mintzberg says: “These days, it seems, there is no shortage of recommendations for fixing the way bonuses are paid to executives at big public companies. Well, I have my own recommendation: Scrap the whole thing. Don’t pay any bonuses. Nothing.”
We say “WHAT?”
First let us say that we believe that Professor Mintzberg is among the top five organizational theorists in the world. In own biography on his website Mintzberg says: “I devote myself largely to writing and research, over the years especially about managerial work, strategy formation, and forms of organizing”.
Mintzberg’s many books and articles are profound treatises on management, strategy and organizational design. We eagerly await and read every publication in the past finding well thought out and well supported critique of issues associated with organization theory. This article, however, is more a “knee jerk” reaction to the state of affairs in the arena of executive compensation. Unfortunately it comes off as a common and uninformed position and worse, it does little to advance the task of properly structuring executive pay.
Perhaps Professor Mintzberg’s intention was to present a controversial position that would help to foster dialogue about the state of executive pay. But whether or not that was his intention, we hope that Professor Mintzberg’s avid readers (ourselves among this group) don’t take his suggestion to “scrap the whole thing” as gospel.
We will continue to advise our clients to design reward programs that are unique to their organizations that drive business success. Most of these programs will include bonuses.
Contact Grahall’s OmniMedia Editorial Board at edie.kingston@grahall.com
Bankers Gone Wild
Expert Perspective by Grahall’s OmniMedia Editorial Board
Everybody loves a great quote and so we couldn’t resist when, according to an article and video clip offered through the New York Times November 19, 2009 Dealbook (the article aptly titled Morgan Stanley’s Mack: ‘We Cannot Control Ourselves’), Morgan Stanley’s John Mack said “‘Regulators have to be much more involved… We cannot control ourselves.’” The article continues: “Wall Street is facing more scrutiny from Washington after the financial crisis last fall. For John J. Mack of Morgan Stanley, that’s just fine.”The article goes on to quote Mr. Mack in his praise of the dozen or so regulators who now patrol Morgan Stanley’s offices in the wake of the firm becoming a bank holding company. “I love it,” he said, adding that it forced him and his firm to watch the level of risk they were taking on.
Hmmmm, he loves it? We kind of hope NOT since the definition of love according to the Merriam Webster on line dictionary includes “strong affection for another arising out of kinship or personal ties, an attraction based on sexual desire, or an affection based on admiration, benevolence, or common interests.” Then again, maybe he means “love” as in “a score of zero (as in tennis)”. In any event it is clear that “love” in this content is an overused term.
Listening to the video tape (available on Huffington Post Mack says: “We have 15 to 20 Fed regulators in our building 24 hours a day…”
Hyperbole, perhaps? We would be delighted to see regulators work even 8 hours a day.
On a more serious note, we expect that Mr. Mack, who has taken a beating in the markets and, in terms of talent pilfering from Goldman and JP Morgan, might be advocating for regulation to level the playing field and create a dampening effect or at least a distraction to these powerhouse competitors.
But has Mr. Mack really thought this out? Time and again we are reminded that the White House is surrounded by Goldman alumni and advocates. Whether it be the Chief of Staff to Treasury Secretary Geithner (or Geithner himself for that matter), or the Deputy Director of the National Economic Council, or the many former Goldman protégés of Robert Rubin embedded in various positions of power, Goldman’s influence runs deep.
It seems there couldn’t be a better time for regulations to be written or regulators to be unleashed that would benefit Goldman Sachs. In fact, it might be in Goldman’s best interest to have these regulations written now, before someone realizes our government might be of and by the people but for Goldman Sachs. Perhaps Mack didn’t think of that when he expressed his delight at having regulators patrolling his hallways. Or maybe this is his way of sending a message that he wants one of those high paying GS jobs?
Regardless of the above speculation, the truth remains that our President has a great challenge ahead of him. America just a few years ago had great “brand” image. Our greatest export might have been the fact that we have rules, regulations – and a level playing field that gave investors a sense of security and confidence. Today that image is badly tarnished and we are at risk of losing one of our best products: investor confidence. We need to fix that.
Contact Grahall’s OmniMedia Editorial Board at edie.kingston@grahall.com