Saturday, September 27, 2008

Heads We Win; Tails We Win

Speaking of Executive Pay in a "Heads we win! Tails we win!" culture - Bloomberg: Wall Street Executives Scored $3 Billion as Banks Rose and Fell

Again let me remind you - there are only a few people in the world with the skill set to run a company (into the ground) and create a (lax) system of (gross in)competance - so therefore we need to pay them these levels of dollars. Because if we did not, we'd be stuck with people of far less intellect and ability. Yep. That's the bill of goods we're sold for years on end. And why the wealth differential among the top and bottom (socialist alert!) is the widest since the late 1920s. Which ushered in quite a nice era in the 1930s ;) And remember, anyone who complains about the system is simply not working hard enough to get to the top. That's what I repeat to all these people working 2 jobs to get by who claim this system is a "bit" top heavy - simply not working hard enough.

EDIT Sunday: Latest golden parachute is Washington Mutual CEO who has been on the job under 3 weeks. For that work he looks to be getting somewhere in the range of $13-$19 million. (different sources quote different numbers) It's good work if you can get it. I wonder if this will raise a political firestorm.
  • Washington Mutual's new CEO Alan Fishman -- who had been on the job a measly 17 days -- was paid nearly $20 million in the last month. That includes a $7.5 million bonus when he was hired Sept. 8. And it includes a mind-blowing $11.6 million cash severance now that the company has gone under. That's on top of his base salary -- a cool $1 million a year. Plus, he was eligible for annual bonuses worth up to 365 percent of his base pay.
  • Wall Street's five biggest firms paid more than $3 billion in the last five years to their top executives, while they presided over the packaging and sale of loans that helped bring down the investment-banking system. (do we get a refund? Can we roll $2.5B of that into the bailout bill? I mean that still leaves $500M for the executives to somehow scrimp by in life)
  • Merrill Lynch & Co., once the largest U.S. brokerage, paid its chief executives the most, with Stanley O'Neal taking in $172 million from 2003 to 2007 and John Thain $86 million after a month's work last year. The company agreed to be acquired by Bank of America Corp. for about $50 billion on Sept. 15. Bear Stearns Cos.'s James ``Jimmy'' Cayne made $161 million before the company collapsed and was sold to JPMorgan Chase & Co. in June. (oh some old friends! [Sep 17: Merrill's Thain, Aides get $200M for Year] I always think about what island Stanley O'Neil is sipping fruity drinks on as the financial world he and friends bilked collapses [Oct 30: You're Fired! Now Here is $160M to Help Ease the Pain])
  • U.S. Treasury Secretary Henry Paulson, the former Goldman Sachs Group Inc. CEO, who received about $111 million between 2003 and 2006, said in testimony to Congress on Sept. 24 that he would accept such limits as part of the plan, after initially opposing them. (for those that don't know he was able to sell all his Goldman Sachs stock TAX FREE as part of his deal to join the US Treasury - I've seen estimates of his wealth at $700M but since I can't source them it's just heresay )
  • ``Shareholders and boards should have done something about this a long time ago,'' said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware in Newark. ``They justified these levels of pay on the idea that they're all geniuses. I think that balloon has burst.'' (uhh, but sir - the boards are usually other CEOs or other C level executives - haha, you see when the fox watches the hen house then... ah, nevermind - we'll see a downtick/sideways in compensation for 1-2 years like after Enron/Worldcom and then we'll forget all our lessons and just repeat it - short attention spans in America - unfortunately Mr Elson I could of lifted your quote directly from stories I read 2001... or in fact 1992 - things never change because the system architecture never changes)
  • Wall Street firms have shared profits liberally with employees. The five biggest -- Goldman, Morgan Stanley, Merrill, Lehman Brothers Holdings Inc. and Bear Stearns -- paid their 185,687 employees $66 billion in 2007, as problems with subprime mortgages mounted, including about $39 billion in bonuses. That amounts to average pay of $353,089 per employee, including an average bonus of $211,849. The five firms had combined net income of $93 billion during the five years through 2007. (so they paid out more in 1 year to employees than their combined net income in 5 years. That's a need trick - how could they do that? Ah stock and stock options - see this Wall Street game has a very cool trick - issue options each year, and the investors subsidize the insiders to riches - since many investors are scrambling for ways to generate income for retirement we all play along the game - i.e. "The Great Transfer of Wealth" game - it's quite a neat set up really - in my hope to make 8% a year so I can send Johnny to college, I combine with 100,000s of others and we send our money in, and then you sell me secondaries so you can reward those creating awesome innovations to American finance like CDOs and MBSs)
  • The $3.1 billion paid to the top five executives at the firms between 2003 and 2007 was about three times what JPMorgan spent to buy Bear Stearns. Goldman Sachs had the highest total, with $859 million, followed by Bear Stearns at $609 million. CEO pay at the five firms increased each year, doubling to $253 million in 2007, according to data compiled from company filings. (this is because so few in the world are qualified to do what they do - keep repeating it on FOX - I'm brainwashed after seeing it for 10+ years)
  • Goldman Chief Executive Officer Lloyd Blankfein made $57.6 million in 2007 in salary and bonus, which includes stock and options granted at the beginning of the fiscal year to reward performance the previous year. Co- presidents Gary Cohn and Jon Winkelried each got $56 million. (so how does it work = lead a company to bankruptcy = $20-30B a year. Keep a company out of bankruptcy = $55B a year? Got it. I know, I know - the services they provide are invaluable and a company led by a CEO with a $2 million pay package would never be able to do such incredible work. Now as a reward let's get that bailout going to help them out from their missteps)
  • Morgan Stanley's current and former chief executives, John Mack and Philip Purcell, were paid about $194 million over the last five years. Mark Lake, a spokesman for Morgan Stanley, pointed to Mack's decision not to take a bonus for 2007 and said he doesn't make ``a lot'' compared with other CEOS. (whew! glad to know - as a socialist I was about to make a comment about the $40 Million PER year but I was too busy writing a check to Congress to subsidize this salary and hundreds just like it)
  • The U.S. government has a weak record when it comes to regulating compensation, said Kevin Murphy, a professor of finance at the Marshall School of Business at the University of Southern California in Los Angeles. ``Every government attempt that has existed to limit or regulate CEO pay has backfired,'' Murphy said. ``I'm fairly confident this one will backfire too. There are always loopholes.'' (of course)
  • Rather than government regulation, the solution is in better corporate governance, Elson said. Companies should negotiate more aggressively with executives and should establish rules that encourage shareholders to protest excessive pay (sounds nice on paper, but nah - let's just fuss about it for a year and then people will forget about all this by 2010 and we can go back to the "good ole days")
Hey lookee here, I'm just as greedy as the next capitalist in America. But at some point it does get a bit ridiculous when so many are struggling just to make it by and the only response to their plight is "work harder" or "move to Canada if you want to be a socialist". When most of us fail, we get no reward for it. Something is very backwards. Since we're all socialists now I guess I can say these things without fear of being called a "Canadian" (the horror)

Michael Brush over at MSN has a good report on the latest "crackdown" on not rewarding those we are going to bailout with excessive pay.... i.e. we subsidize away their problems on the balance sheet and they still laugh to the ... err, bank. Conclusion: It's toothless as usual. Remember, this is America - you pay for the politicians and you set the rules. Occassionally once a decade an emergency so great happens that this gets rule gets pushed back for a few months - and then we return to business as usual. Black Swans commence - we ask how it all happened, and then repeat it every 6-8 years. Booyah.

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