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When will they ever learn?


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Expert Perspective by Grahall’s OmniMedia Editorial Board

expert perspective telescopeIt was sadly without much surprise that we read the February 1, 2009 article by Aaron Elstein in Investment News “Bank bosses get pay boost on the sly”.

The author writes: “Hoping to mute public outrage over huge Wall Street bonuses, the big banks are making a show of paying employees with more restricted stock, which can’t be touched for years, and less cash. Much less well-known is this: Many of the banks are paying dividends on those shares—even though the employees don’t actually own them yet.”

Elstein adds that: “…a review by Crain’s shows that 13 of the 15 best-paid CEOs in New York received them in 2008, the most recent year for which data are available.”  However, the examples he shares — with one notable exception of “AllianceBernstein’s CEO Peter Kraus who received $3.9 million — are what might be called piddling when compared to the total compensation these Wall Street tycoons (Blankfein, Chenault, Dimon, Pandit, etc) rake in. 

Correctly, Elstein points out that “To some critics, the payouts smack of a sneaky way to increase pay”. And to the pitchfork crowd, this apparent indulgence will be seen as one more offense to their sensibilities and one more crime against American taxpayers.

Elstein in fairness also points out that other companies (IBM, Pfizer and Morgan Stanley among them) have altered policies relating to dividend payments on restricted shares.

This practice is not new by any stretch; it has been around for as many years as the practice of providing restricted stock as a form of compensation.  In fact, we would even classify it as a predominant practice.  Although the fact that everybody is doing it and has been for quite some time does not make it either a thoughtful or a correct thing to do.   Dividends are essentially interest payments, and why would someone receive interest payments on property they don’t own?
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