Thirst Of CEO Bonus Is In Their DNA?!!

Posted the other day: Them Insane And Mad CEO Bonuses Just Has To End

Yesterday, the EconomistTimes has the following article: For CEOs, thirst for bonuses may be in their DNA

• NEW YORK: Why do CEOs need extravagant perks even when they are firing staff and pleading for taxpayer bailouts? It may just be in their makeup, experts say.
  
  It takes arrogance and narcissism to become leader of a Fortune 500 company. Those same traits, however, have become their undoing during the deepest recession in decades.
  
  U.S. President Barack Obama has noticed, telling reporters on Thursday he was outraged by a New York State report that $18.4 billion in Wall Street bonuses were paid in 2008 as taxpayers rescued the crumbling financial system.
  
  "That is the height of irresponsibility. It is shameful," Obama said.
  
  New York State Attorney General Andrew Cuomo, who is investigating Wall Street bonuses, welcomed Obama's comments.
  
  "While Wall Street melted down, top executives believed that, unlike the rest of the country, they still deserved huge bonuses," Cuomo said.
  
  For Bob Monks, a former executive who has written nine books on corporate governance, the reason is that the rich and powerful simply love their toys.
  
  "It's a boy thing. Sort of, 'Mine's bigger than yours.' It's really childish," said Monks, a shareholder rights activist and the subject of a book called "A Traitor to His Class."
  
  Monks related a story about flying on someone's corporate jet. The host was devastated when, upon landing, he saw that while he planned for a limo to be waiting at the airport another captain of industry had a helicopter take him to town.
  
  "I thought my guy was going to die. ... It's entirely about people's self-image."
  
  THE JETS OF WRATH
  
  Longtime advocates of shareholder rights were handed a gift in November when Detroit auto executives flew to Washington on corporate jets to ask for billions of dollars in taxpayer money, sparking a public outrage.
  
  More recently, it became known that former Merrill Lynch CEO John Thain spent $1.2 million remodeling his office last year, including $1,405 for a trash can. Merrill Lynch is owned by Bank of America, which consumed $45 billion of taxpayer money through bailouts. (see blog posting: Nice Work John Thain! )
  
  Then on Tuesday, Citigroup canceled plans to buy a $50 million executive jet after a White House rebuke. ( see blog posting: Citi Broke But Still Insist On A $50 Million Jet )
  
  "People don't become head of Merrill Lynch without having a certain sense of self-importance. Once they arrive at that position, they have all kinds of toadies tell them what geniuses they are, then of course they begin to feel their lifelong feelings of self-importance have been confirmed," said Charles Goodstein, a psychoanalyst and professor at New York University School of Medicine.
  
  Defenders of executive perks say generous compensation is needed to retain talent.
  
  Sometimes it's jets but can also include home security systems, country club memberships, sports tickets and financial advice. The value of these benefits is considered income, so CEOs also sometimes get another perk: company help in paying their taxes.
  
  "I was CEO of a bank once and it's not rocket science. You need the same skill set as somebody running a hardware store in a medium-sized town," Monks said.
  
  Steve Thel, a former lawyer with the Securities and Exchange Commission and now a professor at Fordham Law School, blames compliant board members who often come from the same privileged world and can get paid hundreds of thousands of dollars for attending a few meetings each year.
  
  "It's endemic to the system. The last administration didn't think there was any structural flaw. Now across the political spectrum people feel that Wall Street executive compensation is out of control," Thel said.
  
  He predicted Congress would pass legislation granting minority shareholders more say on pay and possibly introduce higher taxes on some parts of executive compensation.
  
  "A year ago it was absolutely unthinkable that this would be heard in Congress," Thel said.

Wall Street Bonus

Published on Bloomber news:

• Wall Street Plans $38 Billion of Bonuses as Shareholders Lose
  
  By Christine Harper
  
  Nov. 19 (Bloomberg) -- Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity. That won't prevent Wall Street from paying record bonuses, totaling almost $38 billion.
  
  That money, split among about 186,000 workers at Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos., equates to an average of $201,500 per person, according to data compiled by Bloomberg. The five biggest U.S. securities firms paid $36 billion to employees last year.
  
  The bigger bonus pool derives from a record $9 billion of fees for arranging acquisitions and $5 billion for underwriting initial public offerings and sales of junk bonds, the most lucrative securities, Bloomberg data show. Bankers' record fees help explain why 2007 will prove to be the industry's second- most profitable after the subprime mortgage market collapse led to losses at Merrill and Bear Stearns. The last time bonuses declined was 2002 when the Standard & Poor's 500 Index fell 23 percent, and Enron Corp. and WorldCom Inc. went bankrupt.
  
  Goldman's record earnings and gains at Morgan Stanley and Lehman mean all the New York-based firms will be forced to pay more in a year when all but Goldman lost more than 20 percent of their market value, said Charles Geisst, finance professor at Manhattan College in Riverdale, New York.
  
  ``They're all going to have to fall into line,'' said Geisst, author of ``100 Years of Wall Street.'' ``If Bear and Merrill plead poverty, they're going to lose all of their good people.''
  
  Pay for Performance
  
  John Thain, Merrill's newly appointed chairman and chief executive officer, is already grappling with the bonus issue and he doesn't start at the world's biggest brokerage until next month. Thain, whose contract calls for him getting at least $44 million in cash and stock payable over five years, said top performers will receive bonuses while those involved in the subprime market collapse that led to the firm's $8.4 billion third-quarter writedown will be penalized.
  
  ``Most of Merrill Lynch's businesses are actually doing well, and so what you have to do in that circumstance is to pay the people who are performing,'' Thain, 52, said in a Nov. 15 interview. ``Getting that balance right, paying the people who perform well and taking enough money from the people who caused some of the problems, that is going to be one of the first topics I address.''
  
  Bonus Pool
  
  Securities firms typically use slightly less than 50 percent of their revenue to pay salaries, benefits and bonuses, a percentage that firms adjust throughout the year. This year's bonus estimate was based on the five-year average ratio at each of the five firms. Year-end bonuses usually account for about 60 percent of compensation.
  
  In the first nine months of 2007, Goldman, Morgan Stanley, Merrill, Lehman and Bear Stearns told their shareholders that they set aside $52.4 billion for compensation, up 9 percent from a year earlier. For the whole year, the figure rises to $62.5 billion, according to analysts' estimates that combined revenue at the five largest securities firms will climb 1.7 percent to $135 billion.
  
  That brings bonuses to almost $38 billion. The total increases when bonuses for employees at hedge funds, leveraged buyout firms and banks such as New York-based JPMorgan Chase & Co. and Frankfurt-based Deutsche Bank AG are included.
  
  The industry's bonuses are larger than the gross domestic products of Sri Lanka, Lebanon or Bulgaria. The average $201,500 bonus is more than four times the $48,201 median household income in the U.S. last year, according to U.S. Census Bureau statistics.
  
  `A Good Hand'
  
  It's also enough to buy a Porsche 911 Turbo Cabriolet, a day for two at a VIP spa suite at New York's Mandarin Oriental hotel, and a year's tuition and fees for a high-school student at Trinity School on the Upper West Side of Manhattan.
  
  Goldman is the world's biggest securities firm and also the most profitable. Analysts estimate the company, led by CEO Lloyd Blankfein, will earn an all-time high of $11 billion this year. Goldman reported a 79 percent increase in third-quarter net income, while profits slid at Morgan Stanley, Lehman and Bear Stearns, and Merrill reported a $2.24 billion loss. Goldman set aside $16.9 billion to pay salaries, benefits and bonuses in the first nine months of the year, exceeding the full-year record in 2006.
  
  ``They're playing a good hand as aggressively as you can play it,'' said John Gutfreund, 78, president of Gutfreund & Co. and former chief executive officer of Salomon Brothers, now part of New York-based Citigroup Inc. That has put Goldman's competitors in ``an awkward position,'' he said.
  
  Natural History Museum
  
  Merrill's revenue probably will decline 13 percent this year after losses from mortgage-related bets in the third quarter, analysts estimate. Merrill said last month that it set aside 58 percent of revenue in the first nine months of 2007 for compensation, up from 49 percent a year earlier, to ``appropriately reward employees.'' The firm said the ratio may rise further in the fourth quarter.
  
  ``I can understand what they're doing at Merrill,'' said William Fitzpatrick, an analyst at Racine, Wisconsin-based Johnson Asset Management, which oversees $1.7 billion and holds Morgan Stanley shares. ``If they don't pay up now, they could lose a lot of their top performers.''
  
  Bankers are showing their confidence about the size of payouts they expect to receive by donating record amounts to organizations including the American Museum of Natural History in New York and the UJA-Federation of New York.
  
  The American Museum of Natural History raised $3.2 million last week at its annual Museum Gala dinner, said communications director Steve Reichl. About 650 people attended, the most ever, he said.
  
  Park Avenue
  
  UJA-Federation, a Jewish philanthropy, raised $41 million, up from $38 million last year, at an annual campaign event hosted last month at the home of Alan Greenberg, the 80-year-old chairman of Bear Stearns's executive committee. The organization hopes to raise at least $21.5 million at its annual Wall Street dinner on Dec. 5, topping last year's $21 million, said Stuart Tauber, UJA's senior vice president.
  
  Demand for ``super-luxury'' apartments in Manhattan, those priced at or above $10 million, also was at an all-time high in 2007, said Pamela Liebman, chief executive officer of the Corcoran Group real estate brokers. A 12-room Park Avenue apartment placed on the market this month sold in less than a week for more than the $12 million asking price, she said.
  
  ``Some people were a little surprised because there's been so much negative talk in the press about the market,'' Liebman said. ``When there's all this talk about the credit crunch and potential job loss and not everybody sharing in the same pie, the ones who are the most fortunate don't want to rub it in anyone's face so they're quiet about their purchases.''
  
  Stock Options
  
  Investment banks will distribute the money less evenly than in 2005 and 2006, according to the Options Group, the New York- based firm that has tracked pay and hiring trends for more than a decade. Employees involved in packaging and trading mortgage- backed securities will see bonuses drop 30 percent to 35 percent, while commodities traders may see gains of as much as 20 percent, the company estimates.
  
  Another change this year: 70 percent or more of bonuses will be stock grants instead of cash, up from 50 percent in a typical year, said Michael Karp, Options Group's CEO.
  
  UBS AG, Europe's biggest bank by assets, is capping the cash portion of investment bank bonuses this year at $750,000 and paying anything above that in stock, said a person familiar with the company's plans. The Zurich-based bank, which reported its first quarterly loss in almost five years, is adding a new type of restricted stock award that employees can sell after one year instead of waiting for three years, the person said.
  
  Slumping Stocks
  
  ``What they do is they issue the majority of the compensation in shares,'' said Roy Smith, a finance professor at New York University's Stern School of Business and a former partner at Goldman Sachs. ``You want these people to be thinking of themselves as working for the same company, and that means they will suffer and improve with the company.''
  
  The size of the payouts is a concern given how badly the shares of most securities firms have performed this year, said Fitzpatrick of Johnson Asset Management.
  
  ``They're paid very handsomely in good times because they're supposed to take a hit in bad times,'' Fitzpatrick said. ``Performance has dwindled this year, and I think they should feel that.''

Well, just how about that?

Such bonus is simply insane!

Huge Wall Street Bonuses. Do they deserve it?

CNN carried an article from Reuters on Wall Street bonuses set to soar

Here is the bottom-line mentioned by the article:

• Bonuses for bankers will probably jump 25 percent, and equities traders may take home 20 percent to 25 percent more, according to the study by Johnson Associates Inc., a New York compensation consultant.
• Investment banking bonuses often comprise the bulk of overall pay. A top banker or trader can receive seven- or even eight-figure bonuses after a stellar year.
• "A lot of people are already making an enormous amount of money" before bonuses, Johnson said. "Now they can make twice as much of an enormous amount of money."

Do you ever wonder if these are really INSANE money being paid?

Do you reckon if these bankers really deserve so much money?

And oh, where and how do you reckon these investment bankers make their money from?

Care to share your views and opinions?