OK. This is really beginning to get on my nerves.
This stupid salary stock thing.
OK. I looked it up special this afternoon. It is permissible for TARP recipients to deliver portions of salary in stock under EESA Section 111, and, since the definitions are the same, under ARRA too.
And it doesn’t actually say anywhere in these compensation restrictions that you CAN’T increase base salary.
But just because it doesn’t say you can’t increase base salary, doesn’t mean to say you have to increase base salary.
I mean, have these people ever heard of a pay cut? They deliver the biggest loss of value to their shareholders in decades and STILL they don’t believe they deserve a pay cut? And I don’t mean just a reduction. I mean a pay cut.
So, when the pay regs came out, we all thought it meant a pay cap, effectively. No bonuses except stock ones, and capped at a third of total annual compensation.
Immediate reaction?
Thousands of lawyers poring over the Act to see if there is any prohibition – among the many prohibitions – against increasing annual compensation.
I mean, if 1/3x + y = x, with x being total annual compensation (yeah, I know, my son’s doing Algebra I and it’s bringing it all back to me) then the only way to make x bigger (and we couldn’t, after all, have x stay the same or get smaller or anything ridiculous like that) is by making y bigger. So that’s what they all did. Salary $800,000? Forget that, make it $5,000,000, now you’re talking.
Now, I’m not saying all the banks did it, but, boy oh boy, a heck of a lot of them did.
But, you know, if stock is supposed to be capped at 1/3 of annual compensation, then that should be it. Pretending it is salary and vesting it immediately so it is not “at risk of forfeiture” is just semantic quibbling. It’s unworthy of our banks and our bankers and our bankers’ compensation committees and their boards and their professional advisors.
Salary stock is rubbish, poppycock, balderdash, blather, tosh, piffle, fiddle-faddle, hokum, bilge. It’s tommyrot, moonshiner, flimflam, guff, hooey, gibberish, flannel, rodomondatade, and, my personal favorite, havers.
Somebody should have stopped them. Somebody should have written the definitions properly. And somebody should have prohibited increasing base salaries in the teeth of the worst financial crisis this country has seen for many a long year.
It just looks bad, if nothing else.
Paul Hodgson - Senior Research Associate
