How has the recession affected executive pay and bonuses?
While many people are delaying $25-$45 oil changes or holding off on going organic for healthier eating in order to help stave off the impacts of The Great Recession, austerity is not a familiar word among executives of large companies.
In fact, pay and benefits at Wall Street’s top 25 publicly traded banks and security firms reached a record of $135.5 billion.
The New York Times reported that Lloyd Blankfein, Chief Executive of Goldman Sachs, paid himself a $12.6 million stock bonus for 2010, which is 40 percent more than in 2009. That’s despite the company’s plummeting profits. Brian Moynihan of Bank of America got $9 million in restricted stock—again, despite the bank’s $2.2 billion loss.
Wall Street rides out recession
Average pay for those working in the finance industry in New York City fell 18 percent, about twice as much as pay in other industries, during the worst phase of the recession, in 2009.
While that may sound troubling, it was not as bad as it sounds when you consider how much more these workers were already earning before the financial meltdown. The average pay for financial workers was still about 2.5 times as much as workers made in other businesses. And, as noted, their compensation is rebounding quite fast.
Still, there are some measures of caution that have been implemented when it comes to compensation for some executives on Wall Street. The practice of deferred compensation is more evident among banks, which can be a tool to improve a long-term focus rather than the get-rich-quick schemes that helped bring down the economy a few years ago.
Auto industry executives also making plenty
The auto industry—except Ford Motor Co.—was largely saved by government-funded bailouts. By recent reports of pay and bonuses, however, it’s hard to imagine the industry on the brink of disaster not that long ago.
Bloomberg reported that General Motors Co. and Chrysler Group LLC—each of which received government-funded bailouts—may award some managers bonuses of as much as 50 percent of their salary.
At GM, meanwhile, most managers stand to get bonuses that are equal to 15 percent to 20 percent of their annual salary. The amounts are as high as 50 percent to less than 1 percent for its 26,000 U.S. salaried employees.
Chrysler, meanwhile, could be paying its 10,755 salaried workers bonuses that average about $10,000; a small group of employees stand to make up to half of their salary.
Ford was the only U.S. automaker to avoid bankruptcy in 2009. The company is expected to pay bonuses equal to 10 percent or more of base pay to some salaried staff, according to Bloomberg.
These payments lay an interesting framework for upcoming talks between the auto industry and the autoworkers union. Obviously, if that much money is available to executives and other workers, the United Auto Workers will want a piece of the industry’s growing prosperity.
“The union is going to be very angry about this,” said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass. “If these kinds of bonuses are paid to salaried workers, then the union’s demands will increase, knowing management can’t claim an inability to pay.”
