Wall Street CEOs face poverty (not really)
Despite a booming stock market, pay cuts are coming to Wall Street. And they’re going all the way to the top.
Some CEOs are seeing their paystubs getting smaller. For example, Citigroup (C) chief Michael Corbat and Bank of America’s (BAC) Brian Moynihan each had his 2014 salary reduced to $13 million from more than $14 million the year before.
That may please those who demanded changes in the way the industry compensated executives and others in the wake of the 2008 financial crisis.
But as Yahoo Finance’s Aaron Task points out, that’s still a LOT of money.
“Thirteen million is more than most people are going to make in their lifetime,” he notes. “This is where Wall Street lives in its own world where pay is coming down. Bonuses aren’t what they used to be and there’s a little bit of people feeling sorry for themselves. But for the rest of us, you’re looking at people making multiples of millions of dollars and you’re going to feel bad for them because their income went down?"
Yahoo Finance Columnist Rick Newman adds at least the situation is better than it was before the Wall Street meltdown seven years ago.
“It’s impossible to know what is fair pay for a CEO, but let’s put it in perspective -- Wall Street CEOs were making high eight- and even nine-digit salaries before the financial bust in 2008,” he points out. “That was clearly outlandish and those were the banks that blew up. That whole structure was completely broken.”
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Task points out that since then demands from Washington and elsewhere to rein in Wall Street compensation have worked. Now, executives are rewarded more based on what they do.
“The good news is people are now being paid more for performance than in the past when these guys got huge paychecks no matter what the company did,” he says. Citigroup had a bad year. Bank of America had a bad year. Jamie Dimon of JPMorgan Chase (JPM) had a bad year a couple years ago-- they cut his pay. They raised it last year. Lloyd Blankfein of Goldman Sachs (GS), he’s had a good couple of years and oh, by the way, he’s the highest paid CEO on Wall Street. So the market is finding a level here, it’s just outside what anywhere else would call normal or what someone should be paid.”
Newman agrees.
“The guys who ruined Wall Street walked away with the biggest pay packages in history,” he notes. “We fixed that problem, so I think we should feel good about that.”
Task adds that since the crash, Wall Street firms have come to realize they have to hold their executives more accountable.
“I do think it’s better that the boards of directors understand they have a responsibility to their shareholders and all their constituencies-- which includes the U.S. taxpayer-- to say, ‘hey, you didn’t perform well, we’re going to cut your pay or find somebody else to put in that job,’” he says.
But are those salaries still too much. Newman believes it’s hard to say.
“Typical CEO pay for the S&P 500 (^GSPC) is around $7 million, so for Wall Street it’s maybe double the typical for a big company,” he says. “Is that too high? Probably, but we’re not going to change it.
And Task notes that while we may only be taking baby steps when it comes to limiting Wall Street executive salaries… they are steps forward nonetheless.
“Pay is being closer tied to performance in the microcosm of the world of Wall Street, which is a tiny world,” he says. “That is progress.”
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