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As evidence of contrition, finance CEOs are waiving their 2008 bonuses. But how is it possible that they’re even eligible for one?
Jan. 6 (Bloomberg) — Bank of America Corp. Chief Executive Officer Kenneth Lewis recommended that he and other senior executives not receive bonuses after five straight quarters of declining profit.
The board is likely to accept the recommendation, according to a memo Lewis sent to employees today.
Here’s who else isn’t taking money:
Citigroup’s Vikram Pandit, Goldman Sachs Group Inc.’s Lloyd Blankfein and Morgan Stanley’s John Mack, Former Merrill Lynch CEO John Thain, and Bloomberg reports, JPMorgan Chase & Co. CEO Jamie Dimon as well. Royal Bank of Scotland, Lloyds TSB, HBOS and Deutsche Bank honchos are also waiving theirs.
Which means, of course, all of these executives were set to get a bonus for the unprecedented risk-taking missteps and destruction of shareholder value that took place in 2008. Clearly those compensation plans are deeply flawed.
UBS alone seems to be moving beyond just saying no thanks to the bonus, and into a real overhaul of their executive pay plans. True improvements include blocking top managers’ bonuses for at least three years and variable pay for executives if the bank’s results warrant them. The chairman will only be awarded a fixed salary.
A sharp rethinking of these pay packages is in order across the industry. And companies would be wise to act before the drumbeat for compensation clawbacks gains thunder.
After all if Bernie Maddof’s unwitting investors have to give back their ill-gotten gains, why shouldn’t executives have to return money they didn’t deserve in the first place?
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