Posted tagged ‘Executive Bonus’

15 AIG Executives to Return Bonuses

March 23, 2009

New York state Attorney General Andrew Cuomo says 15 employees who received some of the largest bonuses from American International Group have agreed to return the money in full.

From the Associated Press:

The commitments amount to more than $30 million of the $165 million in bonuses awarded earlier this month by the troubled insurer.

Cuomo says he still hopes that more AIG employees will return their bonuses. He expects his office will be able to recoup roughly $80 million of the money the insurer paid out.

Last week, AIG’s CEO, Edward Liddy, told Congress that some of the employees were going to give the money back. AIG has come under heavy criticism because the bonuses were given to employees after the company received $170 billion in government bailout money.

White House Goes After AIG Bonus Payments

March 16, 2009

President Barack Obama is going after the bonuses paid to employees of insurer AIG, expressing outrage that taxpayer money was used to reward executives at the bailed-out firm.

From the Washington Post:

“It’s a mob effect,” one senior executive said. “It’s putting people’s lives in danger.”

Politicians and the public spent yesterday demanding that AIG rescind payouts that they said rewarded recklessness and greed at a company being bailed out with $170 billion in taxpayer funds. But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products’ complex trades and who are trying to dismantle the division before it further endangers the world’s economy.

“It’s going to blow up,” said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. “I have a horrible, horrible, horrible feeling that this is going to end badly.”

President Obama yesterday vowed to “pursue every legal avenue to block these bonuses.” But that pledge might have come too late. About $165 million in retention payments started to go out Friday to employees at Financial Products, after numerous discussions with the Treasury Department and the Federal Reserve.

From Reuters:

Though the insurance giant is being kept alive on a government bailout of up to $180 billion, it is now paying out $165 million in bonuses.

“This is a corporation that finds itself in financial distress due to recklessness and greed,” Obama said.

“Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,” he said at the White House.

“How do they justify this outrage to the taxpayers who are keeping the company afloat?”

Obama said he had ordered Treasury Secretary Timothy Geithner to pursue “every single legal avenue” to cancel the bonuses and a Treasury official said later it would modify a planned $30 billion capital infusion for American International Group to try to recoup the bonuses.

White House spokesman Robert Gibbs said the Treasury could impose rules on the $30 billion loan facility for AIG but declined to go into specifics or spell out ways the legal avenues available to the administration to block the payments.

Obama said Geithner was working on the problem.

“I want everybody to be clear that Secretary Geithner’s been on the case. He’s working to resolve this matter with the new CEO, Edward Liddy, who, by the way, everybody needs to understand, came on board after the contracts that led to these bonuses were agreed to last year,” Obama said.

Liddy told Geithner in a letter the insurer was legally obliged to fulfill 2008 employee retention payments but had agreed to revamp its system for future bonuses.

Obama said overall financial regulatory reform was vital to ensure this did not occur again.

He said the government needed “some form of resolution mechanism in dealing with troubled financial institutions, so that we’ve got greater authority to protect American taxpayers and our financial system in cases such as this.”

Pausing to cough, Obama said he was “choked up with anger.”

“We don’t have all the … regulatory power that we need. And this is something that I expect to work with Congress to deal with in the weeks and months to come.”

AIG To Pay $165 Million in Executive Bonuses

March 14, 2009

American International Group is giving its executives tens of millions of dollars in new bonuses even though it received a taxpayer bailout of more than $170 billion dollars.

Great to see MY tax dollars will help pay for these executives to get their bonuses!

From the Associated Press:

AIG is paying out the executive bonuses to meet a Sunday deadline, but the troubled insurance giant has agreed to administration requests to restrain future payments.

The Treasury Department determined that the government did not have the legal authority to block the current payments by the company. AIG declared earlier this month that it had suffered a loss of $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

Treasury Secretary Timothy Geithner has asked that the company scale back future bonus payments where legally possible, an administration official said Saturday.

This official, who spoke on condition of anonymity because of the sensitivity of the issue, said that Geithner had called AIG Chairman Edward Liddy on Wednesday to demand that Liddy renegotiate AIG’s current bonus structure.

Geithner termed the current bonus structure unacceptable in view of the billions of dollars of taxpayer support the company is receiving, this official said.

Merrill Lynch Chief Executive Wants His Bonus

December 8, 2008

According to sources close to the company, Merrill Lynch  Chief Executive John Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered company’s compensation committee is resisting his request.

And we should give it to him, right? No!

From Reuters:

The compensation committee has not reached a decision, but is leaning toward denying Thain and other senior executives bonuses for this year, the people told the paper.

Merrill could not be immediately reached for comment.

Shareholders on Friday approved Bank of America Corp’s takeover of Merrill, a deal fraught with risk but one that would create a banking giant with a leading position in almost every major area of the financial system.

Merrill was arguably saved from extinction when it agreed to merge on September 15, an hour before Lehman Brothers Holdings Inc filed for bankruptcy. The fear was that Merrill could be next if shareholders and trading partners fled, as many did at Lehman and the former Bear Stearns Cos.

Thain has said he deserves a bonus because he helped avert what could have been a much larger crisis at the firm, people familiar with his thinking told the WSJ.

Members of Merrill’s compensation committee agree with Thain that the takeover is in shareholders’ best interest, but believe it would be foolish to ignore strong public sentiment against large compensation packages, the paper said, citing people familiar with their thinking.

Committee members are also weighing the fact that other Wall Street firms, including Goldman Sachs Group Inc, which did better than Merrill this year, are not giving out bonuses to top executives, the paper said.

Yes Virginia…There Will Be No Bonuses for Top Goldman Executives This Christmas

November 17, 2008

After months of internal debate at Goldman Sachs, the seven top executives at the firm, including Chief Executive Officer Lloyd Blankfein, have asked the board’s compensation committee not to give them bonuses in 2008. Isn’t that nice of them?

From the Associated Press:

Better to be a broker than a baron on Wall Street if you’re expecting a big bonus this year.

The decision by top Goldman Sachs executives to forgo bonuses in 2008 is forcing other investment bank bosses to consider following suit. But thousands of lower-tier brokers will still collect hefty bonuses as firms try to keep their top talent from bolting for boutique firms or other industries.

Wall Street employees often receive up to 80 percent of their total compensation from year-end bonuses. Now those payments are attracting more scrutiny from lawmakers and consumer groups because taxpayers are footing the bill for the government’s $700 billion financial bailout.

“Nobody is going to be stupid enough to pay their CEO an outlandish amount of money in this climate,” said Alan Johnson, managing director of New York-based compensation consulting firm Johnson Associates.

He estimates Wall Street CEOs will see their bonuses reduced by up to 70 percent this year.

Goldman Sachs Group Inc. announced Sunday that seven executives, including Chief Executive Lloyd Blankfein, would get no cash or stock bonuses for 2008.

Blankfein received total compensation of $54 million last year, according to calculations by The Associated Press, making him the sixth-highest-paid CEO of a Standard & Poor’s 500 company in 2007.

It’s the first time top Goldman executives have not received bonuses since the 139-year-old investment bank went public in 1999. The executives decided to forgo the payments this time “because they believe it’s the right thing to do,” Goldman spokesman Michael DuVally said.

From BusinessWeek:

Much has been made today of the news that Goldman Sachs’ top seven executives, including CEO Lloyd Blankfein, are giving up their bonuses for 2008. According to a story in today’s Wall Street Journal, the move follows “months of internal debate” at the Wall Street firm, and that now that Goldman has acted, other firms on “Lloyd watch,” as the Journal calls it, will follow suit. Indeed, Swiss bank UBS has already done so, axing bonuses for its executive board members. The WSJ’s DealJournal blog referred to the bonus cut as “The Neutron Bomb of Wall Street.”

But really, how much debate was there? Would Blankfein really have ever gotten a hefty bonus in a year when plenty of CEOs of other struggling companies not part of the bailout have passed up on bonuses and even taken pay cuts? Sure, $68.5 million—the total size of Blankfein’s enormous package last year—was a lot to consider giving up. But with the uproar over bankers pay at a fever pitch, did they really ever consider paying those bonuses?

More telling, if less substantial, I believe, is that some companies outside the maelstrom of the financial crisis have been trimming top executive salaries and slashing bonuses. Earlier this year, JetBlue Airways CEO Dave Barger and Continental Airlines chief Larry Kellner cut their salaries; Kellner also relinquished his bonus. Executive compensation consulting firm Equilar searched its database for BusinessWeek and turned up several recent examples of CEOs whose pay had been trimmed, including Gannett’s chief, who is taking a 17% pay cut. NVIDIA’s board accepted a management proposal (because these are always proposed by management, of course) to do away with cash incentives. Even directors’ pay is getting cut: At RV maker Thor Industries, each of the non-employee directors is forgoing 15% of pay “due to the decline in the Company’s profits in fiscal 2008.”

When companies are restructuring and laying off workers, as Goldman and many of the other banks are in the process of doing, many management consultants acknowledge it’s a best practice for CEOs to share in the pain somehow. When that firm is also receiving government bailout funds, cutting top executive bonuses should be a necessary practice. And one that doesn’t need a lot of debate.