You can fault Bear on other fronts, but the firm has an executive compensation plan that – hold your breath – requires that top brass get no bonuses if the firm misses its ROE targets.
Even though the top executives could have received small bonuses this year, the Wall Street Journal reports they decided to forego them. Note too that it has the same bonus plan in place that it established in 1986. In other words, it hasn’t had comp consultant in “updating” (as in enriching) it. Bear was always known for having particularly high payouts relative to individual production, and improving top level pay probably would have meant interfering in formula that had worked well.
I wish someone could tell me how many money-losing public companies have CEOs that get handsome pay packages, even as they cut heads. The symbolism is terrible. At least at Bear, the top echelon is eating its own cooking.
From the Wall Street Journal:
In an acknowledgment of the most-difficult period in Bear Stearns Cos.’ 84-year history, Chief Executive Officer James Cayne and other senior executives are expected to forgo bonuses for this year, people familiar with their plans say.
The expectation comes as Bear prepares to announce tomorrow its first quarterly loss ever, an outcome certain to curb pay for the firm’s 15,500 employees. This is a turnabout for Bear, which over the years has used its generous, merit-driven compensation system to recruit job candidates it calls PSDs: those who are poor, smart, and have a deep desire to be rich.
Bear’s current executive compensation plan, adopted in 1986, mandates that the firm hit a minimum return-on-equity level before senior brass can receive bonuses. Bear just barely met that ROE standard this year, one of the people familiar with the matter says, and executives could draw on a small bonus pool.
In a nod to the firm’s dispiriting end-of-year results, the executives decided not to take the pay, this person says, a move that should be finalized today, during a scheduled, late-afternoon gathering of Bear’s board of directors.