Phil Cannella’s consumer-advocacy initiative has targeted bank CEOs the past few years—reason being that CEOs continue to demand seven and eight-figure pay even when their companies are in the tank.
The worst part is their shareholders, for the most part, are more than happy to oblige them
Take, for example, Ken Lewis, who was CEO of Bank of America (BofA) when it received $45 billion from the U.S. government in the first two rounds of the TARP bailouts. Obviously, the bank was so successful that it needed to borrow $20 billion from the federal government to avoid a collapse. Mr. Lewis, the CEO who presided over that near collapse, was compensated to the tune of $24.8 million in 2007, the year before it all came crashing down. And that’s not even mentioning the combined $51.9 million it paid the rest of its top executives that year (a group that includes current BofA CEO Brian Moynihan).
Or how about Goldman Sachs CEO Lloyd Blankfein? This man was in charge of the company not only when it nearly went bankrupt, but also when it created the mortgage derivatives that caused the 2008 economic crash. And what did Mr. Blankfein receive in return for his dedicated service to the American investing public? Goldman Sachs felt the paltry sum of $73.7 million in 2008 was appropriate—about $3 million more than he was paid in 2007. (So he actually got a raise for his efforts.) Blankfein has stated publicly that he has no plans to step down even as the effects of his firm’s atrocities continue to surface. He has even claimed that Goldman and its many accomplices in the securities industry are doing “God’s work.”
“I could go on all day with stories like these,” says Phil Cannella. “But there is one bright spot.”
That bright spot was revealed recently when Citigroup shareholders denied a $15 million bonus for that bank’s CEO, Vikram Pandit (probably because Citi’s stock price is down nearly 90% since Pandit took over).
The Dodd-Frank reform law now allows shareholders to vote on pay raises for Chief Execs. Unfortunately, these votes are non-binding, which means Pandit could still pay himself whatever he wants (Did I mention he’s also on Citigroup’s board of directors?). The vote still sends a message though: Pandit and other CEOs will need to start justifying their outrageous pay to their shareholders.
“When CEOs take these huge salaries, it leaves less money available for the rest of their investors. Guys like Pandit and Blankfein should be ashamed of their compensation, especially in light of their companies’ poor or stagnant dividend payouts,” declares Phil Cannella.
FOR MORE INFORMATION FROM PHIL CANNELLA, TUNE IN TO THE CPR SHOW, EVERY SATURDAY 11AM-1PM. LISTEN LIVE