Bank executive paychecks are still high
TEXT OF STORY
Kai Ryssdal: Part of the popular discontent with Wall Street during the financial crisis was how much money a lot of those bankers were making. More cash bonuses and stock options than you could shake a stick at. There’ve been various tries at pay limits; none of them really worked out. And now, two years post-crash or more — just in time for bonus season — a new report says banks are heading back to their old remuneration ways.
Marketplace’s David Gura reports.
David Gura: Federal efforts to limit executive pay after the financial meltdown didn’t stick, says Paul Hodgson. He’s the author of a new report for the Council of Institutional Investors. He says financial companies don’t have the future in mind.
Paul Hodgson: What the executive is focusing on is what the next year’s results are going to be, rather than whether those actions that they’re taking are going to play out into long-term value for shareholders.
That may be O.K. for a trader, he says. But not for executives. They have to think about more than their own enrichment.
Hodgson: Therefore senior management, the most senior management should be held to account for longer performance periods than single years.
Scott Talbott with the Financial Services Roundtable says the industry has made changes. He says executives now have to hold onto stock longer.
Jeremy Stein teaches economics at Harvard. He says there is still a role for government.
Jeremy Stein: I think there’s for sure a reason to regulate the form of pay, I think it’s a slippier slope to regulate the level.
Stein has a modest proposal: what if an executive put his cash bonus in escrow? It would accrue interest and then if the company did well over five years, he or she would get to keep it. If the firm tanked, that money could help cover losses.
But Stein says Americans may be outraged about a much bigger issue: whether banks make too much money.
Stein: Is the thing that is alarming people is that Goldman Sachs pays x number of billions to its executives, or that it made 2x billion in profit and therefore has that much profit to pay to its executives?
In Washington, I’m David Gura for Marketplace.
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