At Rescued Banks, Perks Keep Rolling In

Washington Post: Fringe Benefits Increase Four Percent for Financial Firm Executives, Attracting Government Scrutiny

(Washingtonpost.com)  This story was written by Tomoeh Murakami Tse.

---

Even as the nation's biggest financial firms were struggling and the federal government was spending hundreds of billions of dollars to save many of them, the companies as a group were boosting the perks and benefits they pay their chief executives.

The firms, accounting for more $350 billion in federal bailout funds, increased these perks and benefits 4 percent on average last year, according to an analysis of corporate disclosures filed in recent months.

Some chief executives, such as Kenneth D. Lewis of Bank of America and Jeffrey M. Peek of CIT Group, the major small-business lender now on the brink of bankruptcy, each received about $100,000 more than a year earlier for personal use of corporate jets. Others saw an increase in the value of chauffeured services, parking or personal security.

Ralph W. Babb Jr., chief executive of Dallas-based lender Comerica, was compensated for a new country club membership, with an initiation fee and dues of more than $200,000. GMAC Financial Services chief executive Alvaro de Molina benefited from a $2.5 million payment from his company to help cover his personal tax bill.

Government scrutiny

"You would have thought that this would be the moment when everyone said, 'Okay, the perks have got to stop -- at least while we're indebted to the government,' " said Paul Hodgson, senior research associate at the Corporate Library. "But that didn't happen."

This year may turn out to be different. In June, the Treasury Department prohibited companies receiving bailout funds from reimbursing senior executives for their personal tax payments.

In the meantime, Kenneth R. Feinberg, the Obama administration official assigned to set pay for top executives at seven of the companies receiving the most help, plans to curtail perks such as country club fees when he rules on compensation later this month, according to people familiar with the matter. Perks worth more than $25,000 are getting particular scrutiny from Feinberg.

On average, the chief executives at 29 of the largest public financial companies that have taken bailout funds received perks and benefits worth more than $380,000 in 2008, according to compensation figures included in annual proxy statements and supplied by Equilar, a compensation data services firm. Individually, about half the banks increased their fringe benefits to the top executives. The figures do not include relocation costs and related taxes, typically one-time fees that can skew year-over-year comparisons.

In contrast to the 4 percent average increase in perks and benefits at these companies, the average awarded to top executives at non-financial companies in the Fortune 100 declined by more than 7 percent over the same period, according to Equilar.

Personal use of corporate aircraft and "gross-ups" -- when the company pays taxes due on bonuses or other benefits -- represented more than half of the $11 million in non-cash pay awarded to the 29 chief executives in 2008. Among the more common perks were company cars and drivers, as well as personal financial and tax-planning services.

Although perks represent a relatively small portion of an executive's overall compensation package, they have been targeted some shareholders who argue that these fringe benefits are meant largely to stroke the egos of top company brass.

Jill Schlesinger: 4 Questions about Wall Street Bonuses
White House: Stance on Bonuses is More Than Talk
White House Hits Wall Street Over Bonuses
Wall Street Bonuses Could Mean Headache for Obama

"These executives are already well compensated," said Daniel Pedrotty, director of the AFL-CIO's office of investment. "The notion that some of these folks can't even leave a nickel on the floor, that they want to take every last dime and put it on the company card really rubs people the wrong way but points to a larger problem of lack of independence at the board."

Fewer perks, more pay

Some banks, mindful of the popular resentment over the government's $700 billion bailout of banks and other financial companies, have eliminated certain perks. And a few executives have voluntarily given up benefits that lawmakers have criticized as excessive. At Bank of America, for instance, senior executives will no longer use corporate jets for personal travel starting this year, a bank spokesman said.

Still, some companies that have taken away perks are making it up to executives by boosting their pay. SunTrust Banks eliminated most executive perks in 2008, including financial planning services, club memberships and payment of taxes on the perks, according to a corporate filing. But the bank also noted that "base pay increases were made in 2008 to offset this reduction in perks."

A spokesman for SunTrust, a recipient of $4.9 billion in government funds, said in an e-mail that the bank seeks to "maintain an executive compensation framework that is competitive, appropriate and consistent with industry practice, and we periodically make adjustments in line with that goal."

Corporations have long defended perks as necessary for attracting and retaining talented executives. They also say some perks -- corporate jets and chauffeured drivers, for example -- are provided for security and to ensure that executives can work efficiently. In fact, it is not uncommon for companies to mandate that their chief executive use the corporate jet and car for all travel. American Express is one such company. Last year, it provided its chief executive, Kenneth I. Chenault, with $415,000 in corporate jet travel for personal reasons, as well as $201,000 for a home security system and $46,000 for security during personal trips.

A spokesperson for American Express declined to comment. The company's proxy statement says it eliminated tax gross-ups as of 2008.

GMAC said it had stopped using its corporate aircraft altogether after receiving a federal bailout in late 2008 and that de Molina, its chief executive, had declined a year-end bonus for 2008. He did receive a nearly $6 million award earlier in the year, however, and GMAC covered the taxes due on that bonus.

De Molina, a former executive at Bank of America who arrived at GMAC in 2007 and became its chief executive in April 2008, was "instrumental in leading the company through an incredibly challenging period and successfully executed a series of actions to stabilize the company," said Gina Proia, a company spokeswoman.

CIT, which cut its staff by 22 percent in 2008, declined to comment. Representatives for Comerica did not return phone calls.

[hennighg]

I don't get why neo-cons think all of this is good. All that bail-out money and these banks still stick it to us. I've no sympathy and less patience for them.

[jgjbcmi]

Which is exactly why BofA is about to lose a customer this Friday, when I go to my local BofA, withdraw all money except that used for pre-arranged withdrawals, and head to my local credit union to open a new checking account. After they bilked me out of $70 last payday on OD charges (because of THEIR error, not mine), and seeing what Lewis is taking home, and now hearing this...I'm done with Bank of America.

[payasyougo]

Government.

Rewarding bad behavior at taxpayer's expense.

[reality42]

USSA sucks Greed and coruption

[babooph]

The "BIG LIE" that these guys will "go elsewhere" if not made FAT by massive wads of cash,does not ever say where they will go-Europe would tax them MUCH higher & pay them less-China has a death sentence for corruption & SMALLER pay-these guys going to the moon ?

[dontknowitall]

Unfortunately the corporate officers and politicians that control this nation are the same people that protested in the 60's and 70's. These people who's concern were for women liberation,prison reform,welfare rights,racism,unemployment,poverty and the Vietnam war. Look at them now. The next time I see one of these $*** bags I'll repay that person with the same respect they gave to me when I made it back to the world from Southeast Asia.

[mottasa-2009]

Bonuses at high levels are a contractual agreement. They are prepared by attorneys who are very good at their job. If I (CEO) enter into a contract with you (Shareholder)which you need to read and approve, then it is legal (maybe not always ethical) but legal none-the-less. CEO compensation is always on the shareholder quarterly that I receive, and always are voted on by the shareholders.
Now, if you have an argument about it ethically, then it may hold water. But if it is contractually agreed upon, then there is little room for argument.
We certainly would not like it if we entered into a contract with the bank to pay us a certain amount of interest and then have the bank suddenly decide that we did not "deserve" it.

All I hear people saying these days is "That's not fair!" like some little kid. Who says that life is fair? Would your fair better under Communism?

[msimamaji]

This is a good reason for raising the tax rate of the rich. They have received billions of dollars in tax payer bailouts. It's time they paid that money back.

[bubbadubba]

This is impossible because Joe " you lie!" Wilson (r) SC said this could not happen when HE voted for the first bailouts because the legislation did not allow bonuses for bailed out firms and banks.
Now who lies Joe?

[chonder2]

There is a (or) several statutes on local books about being a witness to a crime and doing nothing about it.I think our Reps in Washington and on the State level should be confronted about the rape and robbery of US citizens by the financial institutions.

If the citizens of this country don't get the corporations out of Washington and reform campaign finance laws THIS WILL NEVER STOP!!

[lovenpeace1]

Folks,
Lets replace top managements and above at all American Corporations with Chinese Professionals. They can do a much better job at a much cheaper price.

[gunnyh1]

It's humorous going through some of the posts on here. I find it hard to believe there are some actually trying to justify the bonus money etc. In 1907 this country banned side betting or speculation due to a stock market crash. In 2000, with a lame duck pesident (Clinton)and congress side betting was quietly allowed again in a new bill. But let's lay aside the republican/democrat fault issue. What we have right now is a political situation where most members from both parties readily take money in the form of campaign donations and political charity donations from the corporations and banks. Senator Dodd (Senate Banking Committee Chairman), Pres. Obama and Sen. McCain were the top three recipients of campaign donations from the very same bankers that received the hundreds of billions of dollars in bailout money. Supposedly Obama was pushing for RE regulation but the latest I have seen on that ...nope...isn't going to happen. So one of the many results from this right now is when you go fill your car up next time thank our congress for the privilege of paying these same bankers about $1.00 per gallon of gas. We should feel deeply honored to lay offerings at the feet of our masters because I see no one raising seven kinds of hell about having to pay it. This country deserves what it gets, you people seem to believe every lie laid out in the press for you. Wait till the bankers manipulate the prices again and the masses will still believe every lie again...Nigerian oil fields having issues with rebels...hurricane this is going to do this....etc etc etc. Until the masses wake up and realize that they are being RAPED nothing will change. DISSOLVE CONGRESS and let's put some decent people in there that give a $%^& about the people of this country.

[Constitionalist]

Corporations and their lawyers have usurped our government. "I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country." (Thomas Jefferson)

"Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny." (Thomas Jefferson)

For years our corporate government has been telling us guns are bad and nobody should have them. "The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government." (Thomas Jefferson)

The only question is, will we have the BALLS to stand up for ourselves? "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants." (Thomas Jefferson)

I quote this man quite a lot, I know. This is not only because he was obviously insightful, but to remind people of our history. We have been an oppressed people before. Through bravery, determination, and committment, our ancestors realized their dream of a free nation. We may still have the political tools to regain the power for the people. If not, we have a choice to make. Either accept rule by corporate america, or fight for your selves and family. Maybe I'm just paranoid, or maybe I'm right. Only time will tell.

[CompletelyFrustrated]

This idiots do not deserve bonuses or perks! If they had done their job in the first place their companies would not have needed BAIL OUT money!!!

As for Bank of America I hate those corrupt lying creeps!!! I closed my accounts with them a long time ago after they changed the status of my account to they could collect higher fees!

Now that I may be coming into a little money they are offering to help me manage it? Right KISS MY A**!!!

[bubbadubba]

Americans have the power to bring the wealthy to their knees and take back control of our country but we are too selfish to sacrifice things we think we must have to save our country.
If Americans quit borrowing money, quit buying as much gasoline, cut back on electricity and utility use by 50%, we could cripple the wealthy.

[jtdev1]

Oh yeah you forgot to mention get laid off...

See when you don't buy things (that make the wealthy very wealthy) a company doesn't need your labor and then your laid off and really can't buy anything.

There is NO WAY to hurt the wealthy. It's all geared that way. The only way is to hurt them physically and that's not a good thing either.

So grin and bare it cause it ain't gonna change.

I think if we excelerate the collapse, then we have a chance to see change in our lifetime.

What good is having all the money when it's worth nothing? Good old fashion labor will never go out of style. I for one am fully able to "Live off the land" if push comes to shove.

[bubbadubba]

We are totally controlled and manipulated by the wealthy who sit behind computers and set prices we will pay.
None of this economy stuff even matters.
If the economy gets better they will just bleed us dry again.
As an example:
"Oil prices briefly rose above $80 a barrel Tuesday as better-than-expected U.S. corporate earnings boosted investor confidence and the dollar fell against other major currencies."
We are chicken slaves who are afraid to take our country back.

[bajajohn1]

Corporate execs must have manure for brains. The only concept of public relations they possess is the PR that is designed to soak an unwitting public.

[jbright9]

Disgusting.

[Mustache_Outlaw]

When an insurance company has to profit 10 billion just to pay out bonuses, I don't see how they can even sustain as a whole.

[endurorob_5]

1notrub11 October 20, 2009 12:32 PM EDT
Enduro - why not? None of these executives does it on their own - they have a whole company behind them making it happen. AND, it doesn't seem to be tied to their performance either (I assume, of course, that the performance of the company reflects the executive's performance).


Their bonuses are normally tied to the performance of the company. But what dose that matter. It is the companies money that they earned legally. Who are you to tell them what percentage they can spend on bonuses. Do you want the guy that lives across town from you telling you what percentage of your earnings you can spend on leisure?

[Mortarman29]

Yes they do.

[element51]

There is a black cloud hanging over America that many chose not to see. It has been there for quite some time and if we don't wake up it will spell doom for the middle class. If you look at the past 30 years you can clearly see that the wealthy have been amassing more and more of the wealth in this country. At the present time, and my numbers may be off a bit, the top 1% control 95% of the wealth. That leaves 5% for the remaining 95% of the population. Pretty one sided don't you think? What do the extremely wealthy want? The answer is simple. They want to turn us into a third world country where people will be glad to work for 5 dollars a day. With that comes total control. There was a time, not that long ago, when they almost achieved that goal but due to an uprising by the workers and a world war their plans were thwarted. For a few years there were regulations in place that protected the public but in the early 80's when Reagan had control most of these regulations were tossed aside and big business was set free to rape and pillage. Over the next few years, up to and including the Bush 2 years more and more de-regulation took place. And look where we are now. Unless measures are taken and taken quickly the middle class will be destroyed. This is a process that takes a little time but look at what is happening now on Wall Street. I had hopes that Obama would attack this problem quickly but it looks like he has had a terrible memory lapse since he was elected. With the House and Senate safely in the pockets of the wealthy we are left with no one to fight for us. It is clear that the ruling elite now smell blood and they are closing in for the kill. Your jobs are gone, your children have no future and you are losing your homes at a record pace. There is an old saying that goes, "in the game of life, he who has the most toys wins." Look in your toy boxes America, they look pretty empty.