Archive for July, 2009

Bank Bonus Tab: $33 Billion

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Published in The Wall Street Journal July 31, 2009 by Susanne Craig and Deborah Solomon

Nine banks that received government aid money paid out bonuses of nearly $33 billion last year — including more than $1 million apiece to nearly 5,000 employees — despite huge losses that plunged the U.S. into economic turmoil.

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Big Banks Paid Billions in Bonuses Amid Wall St. Crisis

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Published in The New York Times July 31, 2009 by Louise Story and Eric Dash

Thousands of top traders and bankers on Wall Street were awarded huge bonuses and pay packages last year, even as their employers were battered by the financial crisis.

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Tarp banks award billions in bonuses

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Published in FT.com July 30, 2009 by Greg Farrell

Citigroup and Merrill Lynch, which lost $55bn in 2008, between them paid 1,400 employees bonuses of $1m or more each, according to a New York state report, released on Thursday, on banks propped up with taxpayer funds.

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Executive Compensation: Let’s Look at Fund Managers’ Pay, Too

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Published in Harvard Business July 30, 2009 by Ben W. Heineman

The white hot debate about executive compensation has focused almost exclusively on the “short-termism” of CEOs, other business leaders, and boards at corporations. The causes of the financial meltdown–excessive leverage, imprudent risk-taking, shoddy judgments–stemmed, in important part, from executives’ seeking to gain huge annual bonuses and drive up the immediate value of stock options, with supine board approval.

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The Great Recession: A Downturn Sized Up

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Published in the Wall Street Journal July 28, 2009 by Justin LaHart

What makes the current recession so bad? Other downturns have been more painful by some measures, but none since World War II has delivered so many severe blows to the economy at the same time.

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The Gold Standard for the Great Recession

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Expert Perspective by Grahall’s John Hammond

expert perspective telescopeTwo articles published in mid-July together offered a snapshot sharply contrasting the economic status of some of our country’s “haves” and “have-nots” during our current “Great Recession.”

On July 14, Reuters reported that “Goldman Sachs Group Inc employees, on average, are within striking distance of $1 million of compensation and benefits this year, just months after the bank received bailout funds and other support from the government. The figure will likely fuel criticism of the politically connected bank, especially at a time of recession and rising unemployment.”

The following day, the New York Times noted that “In California and a handful of other states, one out of every five people who would like to be working full time is not now doing so…. The national unemployment rate has risen to 9.5 percent, the highest level in more than a quarter-century. Yet it still excludes all those who have given up looking for a job and those part-time workers who want to be working full time.” And unemployment is likely to continue rising.

Goldman recently repaid the $10 billion government bailout it had received. The “U.S. Treasury decided the bank was strong enough to survive without government support. The bank also … was a major beneficiary of the government’s $180 billion rescue of insurance giant American International Group Inc.” Marshall Front, chairman of Front Barnett Associates, is quoted as saying, “’It is definitely a politically charged issue, but one of the objectives of Goldman paying back the government was that it would be free to adjust compensation.’”

Goldman pointed out that “money set aside for pay surged 75 percent in the second quarter. Compensation and benefit costs were $6.65 billion, up 47 percent from the comparable quarter in 2008.” What’s more, only those accountable for the kind of profits Goldman has earned will receive large bonuses. Chief Financial Officer David Viniar said “the compensation figures reflected Goldman Sachs’ performance in the second quarter, adding that funds set aside for compensation could be lower in the second half if business deteriorates.”

Meanwhile, deterioration is the word for the country’s unemployment situation, especially in hard-hit states like California, Oregon, Michigan and South Carolina. The Times article coined a term for the latest stage in our economic downturn, following “the prologue, when credit markets began to quiver in 2007; the big shock, when the collapse of Lehman Brothers, in September 2008, led into almost six months of terrible economic news; and the stabilization, when the news became more mixed. Now comes Stage 4: the slog.”

As the term suggests, most people, especially the unemployed and under-employed, face a long forced march through a slow recovery. “After a decade in which household income barely outpaced inflation, a slow recovery could leave many people hard-pressed and frustrated. In just the last week, the Labor Department reported that the number of people filing new claims for jobless benefits dropped [link to: New York Times article July 10  2009 ] — but so did consumer confidence [link to: New York Times article July 11. 2009] and Mr. Obama’s approval rating [link to: Gallup article Juy 10, 2009]. Welcome to the slog.”

And the disparity between unemployment benefits and the $904,624 average annualized compensation set aside in the second quarter for Goldman employees? We might recall the opening of the F. Scott Fitzgerald story, ”The Rich Boy,” whose narrator begins ”Let me tell you about the very rich. They are different from you and me.”

Emaill John Hammond at john.hammon@grahall.com.

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Sameness is the mother of disgust (and loss of talent)

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business-strategy-chess-41Ask the Expert:  Grahall’s Michael Dennis Graham discusses ways that companies can structure packages to attract and retain top talent.

In better economic times, “throwing money at the problem” was the most prevalent approach – and a highly effective one at that. Today, for most companies large or small, TARP or not, public or private, that option can’t be broadly used. So today in these tougher economic times what can companies do?
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I’ll See You and I’ll Raise You

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expert perspective telescopeExpert Perspective by Grahall’s OmniMedia Editorial Board

In their July 16 Wall Street Journal article titled “Banks Ramp Up Pay Packages to Top Talent” authors Kate Kelly and Sara Schaefer Muñoz share that “Some strong banks such as Goldman Sachs Group Inc. are ramping up pay amid big profits. But some weaker banks buoyed by governments on both sides of the Atlantic also need to keep pay high enough to remain competitive, while avoiding the wrath of lawmakers.”

It might not just be lawmakers whose wrath the taxpayer owned banks’ will face over compensation policies.  Clearly “Main Street”  and the media has and will continue to weigh in heavily and angrily.  But it is really beside the point who gets upset.  It is more important what has and will happen and why. 
Continue reading “I’ll See You and I’ll Raise You” »

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The HR Consultant Smack Down is Coming

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Expert Perspective by Grahall’s OmniMedia Editorial Board

expert perspective telescopeAlthough the media has moved onto other topics (from the renewed vigor of the markets to rumors about the role Michael Jackson’s doctor played in his untimely death) the HR Consulting community continues to boil over with conversations and considerations about how to take advantage of the pending merger of Towers Perrin and Watson Wyatt. 
Continue reading “The HR Consultant Smack Down is Coming” »

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Have you no sense of decency, sir?

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Expert Perspective by Grahall’s Robert Cirkiel & Garry Rogers

expert perspective telescopeLast January just a week after his inauguration, President Obama lashed out at Wall Street in reaction to a report that by the New York State comptroller that found financial executives had received an estimated $18.4 billion in bonuses for 2008, less than for the previous several years but the same level of bonuses as they received in 2004, when times were flush.  President Obama said: “That is the height of irresponsibility.  It is shameful.  And part of what we’re going to need is for the folks on Wall Street who are asking for help to show some restraint and show some discipline and show some sense of responsibility.”  (“Obama Calls Wall Street Bonuses ‘Shameful’ ”, New York Times, January 30, 2009.
Continue reading “Have you no sense of decency, sir?” »

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