For bank execs, $500,000 a year is a big comedown

McClatchy NewspapersFebruary 4, 2009 

WASHINGTON — However you count their stock options, bonuses and perks, the chief executives of 10 banks that have gotten at least $161 billion in federal bailout money were doing swell the last year in which their income was publicly disclosed.

Together, they earned more than $200 million in 2007.

President Barack Obama signaled what could be the end of those heady days of lofty executive pay at failing companies with a brief announcement on Wednesday, limiting the brass at the worst-hit companies to half a million dollars in total annual compensation.

Experts say that if the mood in Congress is any indication, disclosures that failing banks have used bailout money hold lavish conferences and pay $18 billion in bonuses could lead to legislation that will finally deter exorbitant pay on the top rungs of the corporate ladder.

Bank of America Chief Executive Ken Lewis had a based salary of $1.5 million, but earned between $16.4 million and $24.8 million in 2007, depending on how his stock options, incentive pay and other extras are tabulated. Now, under the pending rules described by the Treasury Department Wednesday, he would be limited to $500,000 and barred from pocketing deferred rewards until the Charlotte, N.C., bank repays the $40 billion it's borrowed from taxpayers.

Same goes for Vikram Pandit, the head of Citigroup, which received at least $45 billion from the Treasury Department last year to avoid collapse. Pandit, whom New York-based Citigroup hired after buying his highflying hedge fund for an estimated $600 million in 2007, may have to get along in the Big Apple with total pay of $500,000.

Citigroup reported Pandit had a salary of $250,000 in 2007 and total compensation of $573,813. The Wall Street Journal, however, using an independent consultant to analyze proxy statements and other Securities and Exchange Commission filings, estimated his total compensation at $5.66 million.

Obama's decision tightened the screws on companies such as Citigroup and Bank of America that sought and might in the future need "exceptional assistance" under Treasury's bailout program, known as the Troubled Asset Relief Program. Those banks were singled out because they came back for a second dip.

Earlier Treasury Department rules prohibited those needing the biggest bailout aid from taking tax deductions of more than $500,000 of an executive's pay and barred their top five senior executives from receiving "golden parachutes" — hefty pay packages when they're fired or quit. The new rules not only impose the pay cap, but also expand the ban on parachutes to the top 10 executives, limit the next 25 highest executives to receiving one year's compensation. And they require corporate boards of those companies to adopt rules for "clawing back" bonus pay from executives caught cooking the books.

Most important to shareholders' rights groups, companies needing "exceptional" federal aid must fully disclose their senior executive pay structure and submit it to stockholders for a nonbinding resolution. While an Illinois senator, Obama sponsored similar legislation to give investors a "say to pay."

"The Obama administration has now enlisted every American shareholder into a posse to oversee the outlaws on the executive compensation front," said Patrick McGurn, special counsel to the RiskMetrics Group, which advises large institutional investors on corporate governance issues.

He predicted that legislation requiring all companies to give shareholders such a say would soon move in Congress.

Bank of America declined to comment Wednesday on the Treasury's new pay limits. However, Lewis has said that he and his top executives will "share in the pain" and receive no bonuses for 2008.

Other banks that have been major recipients of bailout funds won't be affected immediately, but the Treasury Department said the rules "mark the beginning of a long-term effort" to examine how soaring compensation contributed to the nation's financial crisis and should be reined in.

HOW MUCH THEY MADE

Company proxy statements filed in the spring of 2008 show that executives at eight other banks, which collected more than $75 billion in TARP funds in recent months, also collected tens of millions of dollars in 2007. Their salaries alone didn't reflect it, however.

_ James Dimon, the chairman and chief executive of J.P. Morgan Chase, had a $1 million salary, but earned $30 million in total pay. J.P. Morgan got $10 billion from taxpayers after taking over failing investment bank Bear Stearns last year.

_ John Stumpf, the president and chief executive at Wells Fargo, had a salary of $749,615, but total compensation of $12.57 million. A Wall Street Journal analysis put the total figure at $13.3 million. Wells Fargo has received $25 billion in TARP money.

_ Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, received a $600,000 salary, but collected total compensation of $70.3 million, according to the company — $68.8 million according to the Journal's analysis. Goldman also has received $10 billion from the government.

_John Mack, the chairman and chief executive of Morgan Stanley, was paid $800,000 in salary and $1.6 million in total compensation. A year later, the company received $10 billion from TARP.

_ James Rohr, the chief executive of the Pittsburgh-based PNC Financial Services Group (a beneficiary of $7.5 billion from TARP), received $950,000 in salary, but $18.45 million in total compensation, according to the company.

_ Richard Davis, the chief executive of Minneapolis-based U.S. Bancorp (a $6.6 billion TARP recipient), had an $850,032 salary and $4.3 million in total compensation. The Journal put compensation at $7.3 million.

_ Richard Fairbank, the chief executive of Richmond, Va., bank Capital One Financial, which got $3.6 billion from the government, had total compensation ranging from the Journal's estimate of $17 million to the company's figure of $20.4 million. No salary was listed in company disclosure forms.

_ James Wells III, the chief executive of Atlanta-based SunTrust Banks, earned $1 million in salary, but his total compensation ranged from the company's estimate of $3.4 million to the Journal's $6.35 million. Suntrust has received $3.5 billion from TARP.

(Chris Adams, Tish Wells and Charlotte Observer reporter Christina Rexrode contributed to this article.)

MORE FROM MCCLATCHY:

Economy shrinks, pointing to trying times to come

Surely this isn't what Obama meant when he vowed change

'Buy American' isn't new, but is it really a good idea?

Mortgage limits hit luxury home market hard in California

McClatchy Newspapers 2009

McClatchy Washington Bureau is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service