CEO Salaries vs. Company Profits
America is still picking up the pieces of the worst financial disaster in decades, and the bulk of the damage struck in the financial market. In a time where you might think banks would be keeping their money internal to repair and rebuild their organizations, we have instead gaped in horror as some 0f these same executives receive multimillion dollar bonuses year after year. In fact, a study performed by the Associated Press in 2008 found that $1.6 billion of total government bail out money (money provided to fledgling organizations intended to keep them from total collapse) went straight to various executives pockets. Today we explore where some of that morally-questionable money went.
Ken Lewis of Bank Of America
The Huffington Post reports that Bank Of America received $25 billion in bail out money in 2008, and an additional $20 billion in 2009 to cover the loss they took when they acquired Merrill Lynch. This massive infusion of government money came only one year before Ken Lewis stepped down from the office of CEO with $83 million in compensation packages. The bank was more eager than some other bailed out companies to pay back its debts to the government, and succeeded in doing so late last year. But the Post makes clear that this was not out of any moral or ethical dedication to their duty, but mostly so that their executives would not be hindered by government pay restrictions imposed on bailed out companies.
Vikram Pandit of Citigroup
In 2008, the same year that Citigroup accepted a $45 billion government bailout, MarketWatch reports that former CEO Vikram Pandit took home a benefits package worth $38.2 million. This package consisted mostly of stocks and options, combined with a $958,333 annual salary. Interestingly enough, Pandit declined the opportunity to be considered for huge bonuses, and committed to working for $1.00 in base pay until the company was back to profitability. Additionally, the CEO reimbursed Citigroup over $170,000 for personal use of the company aircraft.
Martin Sullivan of AIG
In July 0f 2008, CNBC reported that Martin Sullivan retired from the collapsing offices of AIG, but not before pocketing a $47 million stock and benefits package. Only a few months later AIG was approved for $85 billion in government bailout funds. Slate.com reports that this king's ransom was raised from selling off federal securities, bringing the fed down below $200 billion in reserves.
Being the world's largest insurance company, the US government saved AIG to avoid the disastrous outcome on the financial market that would have occurred if the company collapsed. If AIG was allowed to go under, NPR reports that it would have resulted in $185 billion worth of damage to the world financial market, a blow that would have resulted in "substantially higher borrowing costs, reduced household wealth, and a materially weaker economic performance."
Richard Wagoner of General Motors
According to the New York Times, former General Motors CEO Richard Wagoner received a $14.4 million dollar "goodbye" package in 2008. That same year, the US government appropriated $50 billion in bailout money to save the auto manufacturer from tanking. CommonCause.org reports that the majority of this money came from pension and stock benefits, along with a $1.55 million salary.
Daniel Akerson was brought in as Wagoner's replacement, and has gone on record saying that he took the job because he believes in the government's decision to save General Motors. "[The bailout] was absolutely the right decision for this company, for this region, for the manufacturing base of the United Sates," Akerson told the Washington Post. "I wouldn't have agreed to go on the board...if I hadn't agreed with that decision."
Frederick Waddell of Northern Trust
Northern Trust received one of the smallest government bailout appropriations of 2008, totaling just $1.6 billion. This is why it was so shocking to see CEO Frederick Waddell recieve a compensation package of over $6 million that same year. As reported By CommonCause.org, this money came mostly in the form of stock, options, and salary. Under Waddell's leadership, Northern Trust succeeded in paying the off the government bail out in full in under a year. In 2009, the institution issued a press release proudly announcing this accomplishment, and that same year Forbes reported that Waddell's compensation has nearly doubled, increasing to $11.89 million. The raise was no doubt justified by his quick action in repaying the debt.
Lloyd Blankfein of Goldman Sachs
Lloyd Blankfein, CEO of the recently indicted Goldman Sachs, reportedly took home over $70 million in 2008 alone. That same year, Goldman Sachs was bailed out to the tune of $10 billion, leading many to question the rationale behind Blankfein's massive compensation. The Huffington Post claims that that this compensation makes over $125 million over the past 10 years.
In 2009, the company was brought up on charges of sub prime mortgage fraud by the Securities and Exchange Commission, who claimed that the organization deliberately marketed bad loans in a deceptive manner. The Post reports that Blankfein settled with the SEC in July to the tune of $550 million.
Jamie Dimon of JPMorgan Chase
In what feels like a total slap in the face, JPMorgan Chase CEO Jamie Dimon somehow found the budget room to snag a $28 million bonus package in late 2007 despite JPMorgan Chase being in such poor financial shape that they needed a $25 billion government bail out a mere year later. As if this wasn't bad enough, CNN reports that 2009 brought about another round of bonuses for Dimon, this time in the amount of $16 million.
Earlier this year, BusinessWeek announced that President Obama was having dinner with Jamie Dimon to dinner to discuss financial reform at the White House. Since the meeting, no official reports have been released disclosing what was discussed.
