Banksters: Wall Street Executives Are Still Getting Outrageous Pay
Despite the recession and the massive taxpayer funded TARP bailout, bank executives are still getting record compensations. The popular discontent with Wall Street during the financial crisis over how much money bankers were paying themselves has somehow faded, as if, once again general apathy replaced public rage. Wall Street’s culture of greed is back stronger than ever. The timid efforts by the federal government to enact pay limits on executives has not changed the mentality of predatory capitalism.
On Tuesday, a new report came out saying that big financial institutions are heading back to their old remuneration system in terms of end of the year cash bonuses and stock options for their top executives. Paul Hodgson, the author of the report for the Council of International Investors, says that federal efforts to limit executives pay after the financial meltdown of 2008 did not stick. Hodgson says financial companies are concerned about showing their shareholders quarterly and annual profits, but do not have the future in mind.
“What executives are focusing on is what next year’s results are going to be, rather than whether those actions that they are taking are going to play out into long-term value for shareholders. That may be OK for traders, but not for executives. They have to think about more than their own enrichment. Therefore, senior management should be held to account for longer performance periods than single years,” said Hodgson.
The global financial crisis of 2008 cast a harsh light on executive compensations at most Wall Street banks. Executives pocketed large compensation packages or left with golden parachute severance payments as their banks descended into bankruptcy or were bailed out by the federal government.
“Many corporate governance experts believe that the size and structure of the pay packages offered perverse incentives that helped drive the excessively risky decisions that pushed financial markets to the brink of disaster,” wrote Hodgson.
Hodgson’s report investigates the nature and significance for investors of the size and structure of executive compensation at Wall Street banks. Hodgson denounces practices such as: excessive cash bonuses; excessive focus on short-term annual growth; pay levels that were so high they effectively insured top executives against failure; little or no Wall Street compensation was linked to long-term future performance.
Hodgson says that none of the banks in the study has addressed adequately the importance of tying compensations to long-term value growth. Hodgson also compared Wall Street compensation structure to pay at several major international financial institutions, and he found out that the non-US institutions incorporated log-term performance measures in pay even before the crisis.
“More vigorous federal oversight of Wall Street does not appear to have changed compensation on the Street for the better,” wrote Hodgson in the report.