Give me a break! How about the billions they made and stole from everyone.
Cayne and Ace need to have a new ball clipper!
Bear Stearns Chiefs to Skip Bonuses
Move Caps Rough Year on Street, Goldman Excepted
By KATE KELLY
December 19, 2007; Page C1
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.
Meanwhile, at Goldman Sachs Group Inc., another year of record earnings has fattened paychecks for the firm's 30,500-person work force, where the average employee took home $662,000 in compensation.
Top executives, who were informed of their pay early this month, will take home tens of millions of dollars, and, according to people familiar with the figures, Chief Executive Lloyd Blankfein is expected to receive close to $70 million. (See related articles on here1 and here2.)
Elsewhere on the Street, firms are dealing with complex dynamics. Morgan Stanley, which today was expected to report a quarterly loss, had an otherwise robust performance marred this fall by a trading bet on subprime, or risky, mortgages, that went bad.
At Merrill Lynch & Co., where $7.9 billion in write-downs from losing mortgage holdings forced the company's CEO to leave, his successor, John Thain, must somehow use his shallow compensation pool to prevent valued players from leaving when the firm needs them most.
To an industry where heavy hitters depend on year-end bonuses, not base salaries, for most of their annual incomes, these decisions are hugely significant. Many midlevel and senior-level Wall Street employees decide whether to keep or exit a job based largely on their past year's pay, viewing the size of their bonuses as an indication of their value to their firms.
Knowing this, brokerage firms try to reward not only their top performers but also the workers they think they will need the most in the coming year.
Now, the firms that are struggling must fight a battle on two fronts: the lack of financial resources they would normally use to keep valued employees happy, and the need to beat back more deep-pocketed competitors who will try to pick off their biggest talent at a time when their employers are most vulnerable.
Except for Goldman Sachs, "this is probably the most tortured period of negotiations that most people in top management have gone through in their corporate lifetimes," said Michael Holland, chairman of Holland & Co., a New York investment company. "One of the problems here is that nobody knows how deep the rot is in the nonperforming portfolios and to what extent that will have an impact on their business in 2008 and 2009," Mr. Holland said.
One way of coping with shrinking revenue is to pay a greater percentages of bonuses in stock to which employees become entitled over a period of years, says Brad Hintz, an analyst at Sanford C. Bernstein & Co. In so doing, companies can avoid booking the expense of that compensation until those stock grants, usually options, actually vest, or mature.
This won't be the first time Wall Street executives have been forced to get creative. When Herbert Allison ran human resources at Merrill Lynch in the late 1980s, the firm introduced packages of compensation tied to return-on-equity targets that were nicknamed Herbies.
Employees were dismayed by the system in 1990, when the return on equity was relatively low, but the following year, it jumped to 21%, and bonuses ballooned. (Mr. Allison later became Merrill's president before leaving in 1999.)
By forgoing their bonus pay, executives at Bear are hoping to increase their ability to compensate key players within the firm. Tomorrow, when Bear announces fourth-quarter results, analysts expect the firm to report a write-down from losing mortgage holdings of at least $1.2 billion, based on the company's own prediction, and a loss of at least $1.79 a share, according to Thomson Financial.
That dispiriting outcome, the capstone to a year in which two internal hedge funds collapsed and wiped out $1.6 billion in investor money, has no doubt shrunk Bear's bonus-compensation pool drastically, forcing tough decisions on how to pay people.
The downturn at Bear has been dramatic. A year and a half ago, Mr. Cayne, 73 years old and one of the firm's largest shareholders, became the first securities industry CEO whose corporate stock holdings surpassed $1 billion in value.
In recent weeks, Bear's executive committee, a five-person panel headed up by former managing partner Alan "Ace" Greenberg, 80, began discussing the notion of skipping bonuses for 2007, the people familiar with their plans say.
Forgoing bonuses would take a substantial slice from the take-home pay not only of Messrs. Cayne and Greenberg, but also President Alan Schwartz, Chief Financial Officer and Chief Operating Officer Samuel Molinaro, and Jeffrey Mayer, Bear's co-head of fixed income.