Back when the Wachovia merger was due to take place, I went to take some cash out of my Equity Line, just in case I needed it. I spoke with a bank manager who said in the summer they had reduced some people’s Equity Lines. I was only registered for 1/5th my equity so was not affected. He also said they expected the merger to go well, so I ended up only taking 1/2 the amount I had planned.
It is unbelievable what the CEO’s of these organizations are paid. I checked “Forbes Executive Compensation” and have this information for 5/3/07, just before the big meltdowns began. It is no wonder they are going broke. Here is the CEO pay in salary and (shares).
- Wachovia, $11 Million, (38 million shares)
- Citigroup, $18M, (8M)
- Wells Fargo, $72M, (135M)
- Lehman Brothers, $52M, (754M)
- Bank of America, $100M, (145M)
- Merrill Lynch, $36M, (114M)
It is no wonder they are going broke paying those salaries. I tried to find the stock values for 5/3/07, but was unable. If anyone else can I would love to see them and have the link.
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To be blunt, those salaries, as high as they seem to you and me, are just a drop in the bucket compared to the total monies being moved during that same year. They would be well worth it—if the banks were solid. Right now, it’s a bit harder to justify.
Want to see something much scarier? Check this out... http://www.glennbeck.com/images/pod/012209-pod2-big.gif
The purpose of a good executive compensation package is to align executive interest with shareholder interest. However, once compensation passes a certain point this alignment is no longer effective. Indeed, it is counterproductive since it focuses executive energy on short-term goals (this year's mega-bonus) rather than long-term business success.
Aside from pure greed/ego, what real incentive does a CEO have to look out for the best interest of a company and its employees/shareholders if he knows that no matter what happens to the company this year's bonus gives him set-for-life financial independence?
Nobody should be surprised that these lotto-sized payoffs lead to reckless disregard for anything beyond the big payday.
