Being the CEO of a bank that got bailed out was pretty rewarding before the crisis.
And even after the government rescue, the rewards to the guy at the top only dropped by one-third.
The top five execs at 10 of the top 20 TARP banks have enjoyed a combined increase in the value of their stock options of nearly $90 million in the past year, which is better than being the chief exec at an S&P 500 company. (TARP CEOs’ comp is 37% higher than that S&P average.) This suggests, however, that the notion that the executives didn’t have “skin in the game” is largely mistaken. They had plenty at stake.
The same set of CEOs also had a three-year pay total of $3.2 billion. But that represents a huge drop. They made $1.2 billion in 2006 and 2007, and last year only took in $800 million. So the crisis and bailout crunched their pay totals by about one-third.
From a study by the Institute for Policy Studies:
From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation. One hundred average U.S. workers would have to labour over 1,000 years to make as much as these 100 executives made in three.
Since January 1, 2008, the top 20 financial industry recipients of bailout aid have together laid off more than 160,000 employees. In 2008, the 20 CEOs at these firms each averaged $13.8 million, for a collective total of over a quarter-billion dollars in compensation. These 20 CEOs averaged 85 times more pay than the regulators who direct the SEC and the FDIC.
While the study is interesting, the fact that it includes pre-crisis years and comps set up before the crisis, mitigates some of the impact. It just comes off as the usual “rich getting too rich” complaint. After all, pay did drop by almost one-third at the bailout banks.
The inclusion of pre-crisis years is really only justifable if we look at CEO comp in those years looting in advance of the bailout. Ramp up risk, take the reward, and run with the money. But this isn’t something that can just be assumed without further evidence.
Perhaps most importantly, CEO compensation is closely linked to the size of a company, so it’s not at all surprising that the guys at the biggest banks got paid the most.