Corporate Governance

Executive Compensation: The Excess and the Agony

By J. Robert Brown

The Institute for Policy Studies has put out a report on executive compensation called "America's Bailout Barons," which more or less reveals the content.  Among other things, the report concluded:

• The 20 US financial firms that have received the most bailout dollars from taxpayers awarded their top five executive officers, in the three years through 2008, pay packages worth a combined $3.2 billion. These 100 financial executives, . . . averaged $32 million each.
• In 2008, the year taxpayers rescued the financial industry, chief executives at the top 20 financial recipients of bailout dollars earned 37 percent more than their CEO counterparts elsewhere in the U.S. economy. These high-finance CEOs averaged $13.8 million last year. S&P 500 CEOs, by comparison, averaged $10.1 million.

The report noted that things would only get worse since these financial institutions had issued stock during the period when their shares were trading at low prices and they have now "inflated in value."   

Probably the most interesting part of the report, however, is the appendix that lists all of the legislative efforts with respect to executive compensation, some of which we've discussed on this Blog.  It demonstrates a variety of approaches to the compensation issue.  On the other hand, the list is depressing.  Most are either limited in time (to those companies that accept TARP money) or largely sitting dead in the water (with only the Bill put forth by Barney Frank having seen much progress).

More and more it looks like this financial crisis and the culprit of excessive compensation will remain unreformed in any permanent way, allowing for this to happen again.

Full post as published by The Race to the Bottom on September 08, 2009 (boomark / email).