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Lehman Brothers rewards bad times
The entrance to a Lehman Brothers bank
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TEXT OF STORY
Renita Jablonski: Remember how your mom made you eat your dinner before you got dessert. Well, in the magical world of Wall Street right now, it seems you can get your hot fudge sundae -- even if you never eat a bite of your spinach. Lehman Brothers -- the troubled Wall Street investment bank -- is paying out 2008 bonuses this month.
Jill Barshay reports.
Jill Barshay: By all accounts, business has been awful at Lehman Brothers. So why are employees getting bonuses at all -- never mind getting them six months early?
Bob Salwen: Desperate times call for desperate measures.
Bob Salwen is a principle at Executive Compensation Corporation. He says Lehman is issuing stock bonuses precisely because business is so bad.
Salwen: It's an attempt to prevent a brain drain and stem an exodus of their intellectual capital.
Lehman's stock is down 65 percent since January. The company's hoping to reverse that slide. It it does, employees could make mint, so long as they stick around through the 3-year vesting period.
Salwen: If the stock continues to plunge, this is going to be an ineffective measure.
Salwen says the July bonus is a tiny carrot, just 20 percent of what employees got for 2007. Both they and the company will need to perform if they want to collect more.
In New York, I'm Jill Barshay for Marketplace.
Is this a joke? Lehman had lost 65% its value since December, they are doing quite poorly, many of their clients are looking for other banks or options, and what they are doing now, just “rewarding†for this disaster their executives with an early bonus. It may be true that they want to keep their “brains†with them, and not let them go to other banks or industries. I know by fact, that some of the most brilliant executives in Europe are trying to find a job outside the banking and brokerage industry, they are extremely pessimistic about their future and of this industry as well.
