Blogs & Comment

Bailouts and bonuses

Former Merrill Lynch CEO John Thain spent over $1 million refurbishing his officeand, as the Fi nancial Times of Londonreported, was mulling over a $10-million bonus for himself while rushing through $3- to $4-billion in bonuses to Merrill Lynch employees that became effective Dec. 29 — a day or so before ownership of the thundering herd passed over to Bank of America. A few weeks later, in mid-January, Bank of America CEO Ken Lewis announces Merrill Lynch is in far worse shape than expected and will drag down his bank unless the government forks over billions more in dollars. The news is instrumental in causing stock prices to plunge in the sector, as highlightedthe Financial SPDR exchange traded fund(XLF).
Bank executives really don’t live on the same planet as the rest of us, said one person in the comments section to an online article. Another said: If the banking meltdown had happened in China, people would have been shot. In Japan, they would have resigned in disgrace. But here the bankers whine about no bonuses and redecorate. It’s a disgrace.
One has to also look, I believe, at the environment that allows banking and other executives to behave like Marie Antoinettes. Specifically, it should be asked: where are all the institutional shareholders — pension funds, endowment funds, mutual funds, and all the others who are investing billions in these companies? Shouldnt they be doing a better job looking after the interests of the people whose pensions and savings they have invested? Where is their fiduciary duty? Why arent they more active in the boardrooms, watching over how invested monies are being used? Why not, for example, get out and campaign for bonuses to be clawed back(to bring up one of my pet peeves) — or at least just to have them stopped?