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CEOs and their Bonuses

December 11, 2008

The latest news from the US – Merrill Lynch CEO will “forgo” his $10 million bonus because it “would send the wrong message.”

Obviously not everyone on Wall Street agrees. General Motor’s vice chairman warns that in the process of fixing America’s auto industry, GM’s CEO should not be made a “sacrificial lamb”. That’s sure to cut all the way down to arguments about the CEO’s pay package.

As of yesterday, embattled AIG is paying out $4 million in “retention payouts” to its executives, with one executive getting as much as $3 million.

All this money going into their pockets as thousands of their employees are rendered jobless.

And the reasons these companies are giving for doling out all that cash to their leaders?

“We would be doing a disservice to the taxpayer — and would place AIG’s asset divestiture plan at risk — if we did not act decisively to ensure that our key employees remain,” says AIG’s CEO, while Merrill Lynch’s CEO claims, “[My] shepherding of [the company] into a merger with Bank of America Corp. in September saved it from a worse fate,” when he lobbied Merrill’s board for a bonus between $5 million and $10 million.

So on one hand, they’re begging for taxpayer help. On the other hand, while they agree this is all high risk, they believe everyone should take the risk except themselves. The attitude is, “Want me around? Then pay me.”

And to drive the point home, there’s that disturbing tone, “If you don’t pay me, you may not only lose me, you also stand to lose all our business partners who trust only me. And when they’re gone, the company may not be able to pay back the billions of taxpayer money you lent us.”

Bottom line: If you ever want to see your money again, pay up.

Now why does that have a familiar ring to it?

But lets set aside the prejudices and put yourself in their shoes. If you were the CEO and you did as a matter of fact save the company from bigger damage, and if you were a true professional who believe people ought to be paid what they’re worth, would you forgo your bonus as an act of goodwill?

In fact, would any CEO want to lead this mission, risk his reputation on it and make only $200,000 a year for the trouble?

Note that million-dollar bonuses is business as usual for big US CEOs, apparently regardless of the company’s performance, and you’ve no choice but to dangle huge sums to attract top talent.

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5 Comments leave one →
  1. December 11, 2008 11:09 am

    Maybe they can postpone the bonus thingy until everything settles down? 😀 Rather than being so ‘honest’, they should actually take into consideration that their business is indeed not doing well.

    If full recovery does take up to 5 years, these CEOs themselves may not 100% certain they’ll be around when everything settles down. With an angry mob demanding their blood, they want to know they’ll get something if they get kicked early, hence this insistence to grab their $$$ now I suspect.

  2. LC Teh permalink
    December 11, 2008 11:14 am

    Can’t tell the difference if you line them up side by side with our ah long chieftains or the mafia dons.

    Yeah, that’s what the public is saying too. I won’t be surprised if these CEOs turn around and say, “Okay, here why don’t YOU do it? We’re outta here.”

  3. LC Teh permalink
    December 12, 2008 12:45 pm

    And that’s precisely how they got the companys or the public by the balls. They have the connections, the relationships, influence and the network as part of their resume’ for that position. Their appointments are not just based on their talents. You get any Tom, Dick or Harry in that post, you’ll have to wait for him to grow up.

    And the ah long chieftains and mafia bosses don’t get up there by accident either. Their knuckles, cocktails or talents with red paint should tell you.

    Yeah, so its looks like damned if you do, damned if you don’t. Btw, looks like the automaker rescue plan is dead in the water so even the mafia boss will have to go hungry this time. Being a house of cards, I expect the AIGs and the Citis to break out in cold sweat about now.

  4. LC Teh permalink
    December 12, 2008 12:49 pm

    Not to forget the strongest and toughest connection; the political one.

    It was the Republicans that shot down the autworker rescue plan. An important political bridge was burnt last night. Hard to see any Republican appointed to power in the next 8 years…

  5. LC Teh permalink
    December 12, 2008 5:24 pm

    They need another Charlie Schwab to wade in there and break the impasse. Are we that lacking in real leadership these days? Obama may have to take that role now…

    I’ve learnt never to underestimate the selfishness of leaders like the ones involved in this deadlock. Ego often comes together with leadership as a package.

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