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EDITORIAL: Cutting CEOs' bonuses won't fix problems
(Waterloo-Cedar Falls Courier (IA) Via Acquire Media NewsEdge) Dec. 28--The news is filled these days with reports of corporate executives giving up their bonuses or offering to work for minimal pay.
We appreciate the symbolic value, but these masters of finance and industry reaped fortunes during the boom times, all the while their businesses were destined for collapse.
It seems the Big Three executives bear the worst of public scorn due to a number of factors. For one, they were victims of bad timing. They sought government help after the public had already gone sour on the $700 billion financial sector bailout. The high-profile nature of their industry also ratcheted up the spotlight. Showing up for Congressional bailout hearings in separate private jets was a public relations gaffe.
But in recent years, the Big Three's actual products have been gaining acclaim, all while their business model was still driving the industry into the abyss.
General Motors CEO Rick Wagoner earned $14.4 million in 2007. Now we're sure poor Rick lost a healthy chunk of money in the stock market collapse this year, but we're also relatively certain that if he were to retire today, he could live a fairly extravagant life for the remainder of his time here on Earth.
Wagoner has volunteered to work for $1 next year as he tries to salvage the company.
But the crazy thing is, for all the scrutiny that Wagoner and his fellow Big Three executives have been subjected to during all of the bailout talk, the executives at banks and investment houses that saw much bigger bailout plans subject to much less oversight have racked up compensation that make Wagoner's seem like a pittance.
At Goldman Sachs, Lloyd Blankfein received $68.5 million in cash and stock in 2007. After the firm took a $10 billion government bailout and posted its first money-losing quarter since it went public in 1999, Blankfein and others in top management at the firm volunteered to forego their bonuses.
Merrill Lynch also received a $10 billion bailout. Its CEO, John Thain earned $83 million last year, $68 million coming in stock options.
Of course the actions that created the financial freefall of 2008 were done before this year, so basically Blankfein and others are giving up bonuses for mistakes of the past. They racked up fortunes during the boom times, but it was those same times when they were steering their respective ships aground. Those bonuses will not be repaid.
An Associated Press investigation showed the 116 banks that received bailout money gave their top tier of executives about $1.6 billion in 2007.
The George W. Bush administration took the teeth out of Congress's attempts to stave off golden parachutes to executives in the bailout plan.
As time goes on, more will be known of what happened to the bailout money. Undoubtedly some executives will have lined their pockets with the infusion of taxpayer money.
Other executives have noted the public sentiment and decided to make amends by deciding to cut their own bonuses in light of the situation.
In this case, though, it seems like it's too little, too late.
To see more of the Waterloo-Cedar Falls Courier, or to subscribe to the newspaper, go to http://www.wcfcourier.com.
Copyright (c) 2008, Waterloo-Cedar Falls Courier, Iowa
Distributed by McClatchy-Tribune Information Services.
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