WHAT HEELS: You Can’t Have Your Cake And Eat It, Too
When is a bonus not a bonus? When it’s called something else. The Wall Street Journal reports that Citigroup Inc., Morgan Stanley and other Wall Street firms receiving taxpayer-funded bailouts are looking for ways to cut the strings that came attached to the money:
The crackdown, part of the economic-stimulus package passed by Congress and signed into law by President Obama last month, limits bonus pay for the top five executives of any recipient of taxpayer capital through the Troubled Asset Relief Program, plus the 20 next-highest-compensated employees.
The discussions are at an early stage, partly because the government hasn't yet issued specific rules on the bonus payments that will be allowed at companies that received TARP aid. The talks also are proceeding cautiously because of the political volatility of pay, bonuses and perks on Wall Street, including outrage over American International Group Inc.'s promise to pay $450 million in bonuses to employees in the insurer's financial-products unit.
Most traders and bankers on Wall Street get a base salary of anywhere from $200,000 for managing directors to $1.5 million for a chief executive. But the lion's share of their pay comes in the form of a bonus, a tradition that began when most firms were private partnerships and partners shared directly in the annual income of the firm.
As banks and securities firms wrestle with growing regulation of compensation practices, substantially increasing the base salaries of top employees could become a popular response, some industry officials say. …
Raising base salaries would play into "a long and dishonorable tradition of responding to any attempt to curb pay excess by just putting it in a different pocket and calling it something else," said Nell Minow, editor of the Corporate Library, a research firm focusing on corporate-governance issues. Any attempt to get around bonus curbs "can expect pushback from shareholders," she predicted.
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