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Institute for Policy Studies

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  • Released September 2, 2009

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Global Economy Inequality and the Common Good » Report

Executive Excess 2009: America's Bailout Barons

The 16th annual Institute for Policy Studies "Executive Excess" report exposes this year's windfalls for top financial bailout recipients.

Ten of the top 20 financial bailout firms have revealed the details of stock options pocketed in early 2009. Based on rising stock prices, the top five executives at each of these banks have enjoyed a combined increase in the value of their stock options of nearly $90 million, according to the report, the 16th in a series of annual "Executive Excess" reports.

"America's executive pay bubble remains un-popped," says Sarah Anderson, lead author on the Institute study. "And these outrageous rewards give executives an incentive to behave outrageously, putting the rest of us at risk."

Key Findings

The Bounty for Bailout Barons: From 2006 through 2008, the top five executives at the 20 banks that have accepted the most federal bailout dollars since the meltdown averaged $32 million each in personal compensation. One hundred average U.S. workers would have to labor over 1,000 years to make as much as these 100 executives made in three.

Layoff Leaders: Since January 1, 2008, the top 20 financial industry recipients of bailout aid have together laid off more than 160,000 employees. In 2008, the 20 CEOs at these firms each averaged $13.8 million, for a collective total of over a quarter-billion dollars in compensation.

Wall Street Pay Dwarfs Regulator Pay: These 20 CEOs averaged 85 times more pay than the regulators who direct the Securities and Exchange Commission and the Federal Deposit Insurance Corporation. These two agencies, many analysts agree, have largely lacked the experienced and committed staff they need to protect average Americans from financial industry recklessness.

"The lure of lucrative private sector jobs doesn't just siphon off talent from public service," says Sam Pizzigati, an IPS Associate Fellow and report co-author. "It also breeds corrosive and ever-present conflicts of interest: Why 'get tough,' as a regulator, on a firm that could be your future employer?"

Federal Response Falls Short: An eight-page table at the end of America's Bailout Barons tracks the fitful progress in Washington on various executive pay reforms. Several of these have strong potential to deflate the executive pay bubble.

The federal government, for instance, could give tax breaks and federal contracting preferences to companies that maintain a reasonable pay gap between their top executives and workers. Rep. Jan Schakowsky (D-Ill.), in her proposed Patriot Corporations Act (H.R. 1874), would extend these tax breaks and procurement bidding preferences only to those companies that compensate their executive at no more than 100 times the income of their lowest-paid workers.

A generation ago, typical big-time corporate CEOs seldom made more than 30 or 40 times what their workers took home. In 2008, the IPS report shows, top executives averaged 319 times more than average U.S. worker pay.

The bulk of the debate over executive pay reform has revolved around questions of corporate governance, such as the independence of compensation committees and the role of shareholders.

"Governance problems do need to be resolved," notes IPS Director John Cavanagh. "But unless we also address more fundamental questions - about the overall size of executive pay, about the gap between the rewards that executives and workers are receiving - the executive pay bubble will most likely continue to inflate."

"Public officials in Congress and the White House hold the pin that could pop the executive pay bubble," says IPS Senior Scholar Chuck Collins. "They have so far failed to use it."