Bank bosses might profit by sharing in the pain

October 29, 2008|By JAY HANCOCK | JAY HANCOCK,jay.hancock@baltsun.com

When taxpayers bailed out Chrysler Corp. in 1980, CEO Lee Iacocca acknowledged the extraordinary assistance with a sacrifice of his own. He cut his salary to a dollar a year and trimmed other executives' pay by up to a tenth.

"Although my reduced salary didn't mean I had to skip any meals, it still made a big statement in Detroit," Iacocca wrote in his autobiography. "It showed that we were all in this together. It showed that we could survive only if each of us tightened his belt."

Now, as the government launches a rescue a thousand times bigger, similar gestures are hard to find. At bank after bank uploading billions of government dollars, it's basically executive pay as usual.

So-called "restrictions" on compensation for bosses receiving bailouts are a joke.

Any company getting government cash must not pay bonuses based on fraudulent profits. (All you other corporations? Go for it!)

Plus, no golden parachutes. (Note to execs: Delay pulling the rip cord until the emergency is over. Or get out early, like Citigroup's Charles Prince III. He left a year ago with a $10 million bonus.)

For top bosses, forgoing chunks of pay would show gratitude for the unprecedented public assistance given Citigroup, Bank of America and the other companies.

It would signal responsibility for helping wreck the economy and shareholder value. And it would trumpet the need for sacrifice at a time of national peril.

But no banking executives I know of have mimicked Iacocca.

At Bank of America, CEO Kenneth D. Lewis pulls down a salary of $1.5 million and last year earned $23 million on top of that. Wells Fargo CEO John G. Stump made $750,000 in salary last year and total compensation of $12.6 million.

Citigroup CEO Vikram Pandit got stock worth $27 million in December when he replaced Prince as CEO. JPMorgan Chase boss James Dimon makes $1 million in salary and took home a total of $28 million last year.

Collectively, these four companies - the biggest diners so far at the corporate welfare buffet - have lost about $117 billion on bad mortgages and other stupid bets. Together, they got $100 billion in taxpayer cash.

At every single one, it looks like business as usual. Not only are they still shoveling money to top executives, but they're taking taxpayer dollars and paying them to shareholders as dividends.

"Thanks for the opportunity to comment, but we do not have anything to contribute to your story," said a Wells Fargo spokeswoman when I suggested that Iacocca might have something to teach the company. (It should be said that Wells Fargo has lost much less on bum mortgages than its competitors and didn't want to take the handout.)

Representatives at the other three banks didn't respond to queries.

The tradition of the "dollar-a-year man" goes back at least to World War I, when the well-off gave their talents to the government for minimal pay. Rich Americans have often been happy to pitch in or at least try to demonstrate solidarity with the masses when times are tight.

Some technology executives cut their salaries during the dot-com crash. Apple Computer CEO Steve Jobs still pays himself only a dollar a year, although he owns lots of stock.

Yet The New York Times reported that Wells Fargo Chairman Richard M. Kovacevich "expressed concern" about executive-pay restrictions when he met with eight other bankers to discuss the bailout package with Treasury Secretary Henry Paulson.

Bank of America's Lewis was reported to have countered, "We are out of our minds" if they balked at the plan because of pay rules.

That's the right idea. But the fat cats ought to go much further and take painful pay cuts. Automotive executives lining up for their own bailout could profit by Iacocca's example, too.

The moves would be worth far more in symbolic value than the dollars they cost.

"If everybody is suffering equally, you can move a mountain," Iacocca wrote. "But the first time you find somebody goofing off or not carrying his share of the load, the whole thing can come unraveled. I call this equality of sacrifice. When I started to sacrifice, I saw other people do whatever was necessary. And that's how Chrysler pulled through."

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