Bankers win when they win, and win when they lose.
Bankers are paid obscene amounts when times are good, but they get equally obscene amounts when they fail; heads they win, and tails they win again. This doesn’t sound right to anyone. And it doesn’t look right either – see this chart:
Bank CEO Years Pay Exit Pay*
Lehman Brothers Dick Fuld, Jnr. 1993-2008 $466,000,000 $62,000,000
Related
Citigroup Chuck Prince 2003-2007 $53,000,000 $40,000,000
Merrill Lynch E. Stan O’Neal 2001-2007 $70,000,000 $161,000,000
Bear Stearns James Cayne 1993-2007 $232,000,000 $61,000,000
* includes stock sales
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(Source: various, as quoted by IHT on 25/09/08)
Not only is there a huge disparity between the Pay levels, but also between the Exit Pay; and also between the size of the four operations and their profitability and losses prior to exit: in 2006, the last year before the credit crunch, the average levels of quarterly profits were as follows:
Lehman $1 billion-
Citigroup $5 billion+
Merrill Lynch $1 billion-
Bear Stearns $½ billion-
On these figures, Chuck Prince of Citigroup should have received most, not the least.
The average quarterly losses when these banks started to post losses were as follows:
Lehman $3 billion+ for 2 quarters
Citigroup $6 billion- for 3 quarters
Merrill Lynch $5 billion- for 4 quarters
Bear Stearns $1 billion- for 1 quarter
On these figures, Chuck Prince of Citigroup’s Exit Pay should have been much less, not more than, his normal Pay; and Stan O’Neal of Merrill Lynch’s Exit Pay should have been the smallest of all, not the largest.
What these figures show is that there is no such thing that even resembles a market for CEO’s pay and severance pay in this sector, which appear to be governed by the law of the jungle, with he who wields the biggest club (i.e. lawyer) coming off best.
What do you think?
Should shareholders approve boardroom pay, in advance?
Should pay and bonus’s in the financial sector be regulated?
How and when should bonuses be earned and paid?
