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 now that Goldman has acted, other firms on “Lloyd watch” 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 such a tumultuous year? 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, is that some companies outside the maelstrom of the financial crisis have been trimming top executives’ 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 far from the bailout’s epicenter 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 laying off workers, as Goldman and many of the other banks are doing, many 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 an obvious practice. And one that doesn’t need a lot of debate.
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