Finding the winners on Wall Street is usually as simple as looking at pay. Rarely are bankers who lose money paid as generously as those who make it. But this year is unusual. A handful of big banks that are struggling in the postbailout world are, by some measures, the industry’s most magnanimous employers.
Posts Tagged ‘Shareholder Value’
During a House Oversight Committee hearing in October, a rare bipartisan consensus appeared to be building around a strategy to rein in executive compensation.
US banks, shareholders actually want their executives to be rewarded for taking on excessive risk.
“We need to empower the stockholders of public companies to better manage the package of pay and the incentive packages of their key executives,” said Representative Darrell Issa of California, the panel’s ranking Republican.
“Some constraints on these companies are necessary to protect the safety and soundness of the entire financial system,” said committee chair Edolphus Towns, a Democrat from New York. “We need to give the shareholders a way to get this under control.”
But while reinforcing shareholder rights may solve other corporate governance problems plaguing the US economy, like sloppy board oversight and managerial incompetence, shareholders are not going to end the bloated pay practices that have sparked outrage over the past year.
Some of the largest shareholders in Goldman Sachs Group Inc. have urged the Wall Street firm to reduce the size of its bonus pool, arguing that it should pass along more of its blockbuster earnings to investors, according to people familiar with the situation.
The investors hold tens of millions of shares in Goldman Sachs, which is on track to make the biggest employee payout in the firm’s 140-year history.
In his October 26, 2009 article for the Wall Street Journal “Curbing Executive Pay, But Not the Perks” Brett Arends concludes that “a government crackdown on executive compensation may not be the disaster for American capitalism that many fear. However, if [Congress] want to do investors a real favor, they should go after the perks as well as the pay.”
Public uproar over ongoing excesses in executive compensation will surely invoke heightened scrutiny of executive perquisites and retirement plans (see this week’s Grahall The Haves vs. The Have Nots).
Continue reading “Do Corporate Jets Ground Profits?” »
Published in Institutional Investor August 5, 2009 by David E. Adler
Overconfident, filled with hubris, set in their ways—this describes the strategic behavior of most CEOs. But there is a special category of CEO, a subspecies if you will: superstar CEOs. These are the CEOs on talk shows and the covers of the business press holding forth on the issue of the day. The ones who appear at the World Economic Forum at Davos. The ones seemingly more worried about global carbon emissions rather than their company’s immediate future. Although it is clear they are concerned global citizens, what is less clear is if they are good for business: How does having a superstar as CEO affect company value?
Published in The Motley Fool, May 7, 2009 By Liz Peek
…shareholder anger about former excesses, and the demand for say-on-pay, is not likely to disappear.
Published in The New York Times April 26, 2009 by The Associated Press.
As annual meetings ramp up in earnest for the first time since the economic meltdown, the gatherings are very different affairs. Perks and glitz are out. And, at least in the financial sector, shareholder anger is in.
In the article “Employees Spending More Time Worrying About Job Security” published by SHRM on March 13, 2009 , Theresa Minton-Eversole of SHRM addresses the fact that “With the constant barrage of media attention focused on the economy and the escalating unemployment rates, its no wonder employees – at all levels – are concerned about their careers and their future employment prospects.”
At a time when employees desperately need guidance and reassurance from their leadership team, it seems they’ve all gone missing (or at least hidden behind closed doors). To the employee, this signals more bad news is on the horizon and so the informal communications network starts humming about the “what ifs” and productivity takes a nose dive. To the executive, the closed-door meetings are a necessity to concentrate on solving the crisis quickly.
Continue reading “Filling the Short Term HR Gap (aka – It’s about Leadership, Stupid!)” »
In an article published in Market Watch on December 16, 2008, Christopher Hinton (journalist for Market Watch) addresses the issue of pension plan funding and says: “Some companies think they have a solution though by contributing their own stock to the plan in lieu of cash, particularly if they think the market is undervaluing their shares.”
With the advent of PPA funding rules in 2009, and with pension funding levels very low due to market losses, a number of public companies will fund their pension plan with stock in lieu of cash. This is a double-edged sword. For example, the article points out that the plan potentially can gain tremendous influence over the company. Also, the plan now has more at risk since pension distributions tend to be counter-cyclical to company performance (since staff terminations and retirements increase in those times.) Said another way, when the plan most needs money, it will have the least. Email Robert Cirkiel at firstname.lastname@example.org