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Worst and Best of the Bailout?

The AFL-CIO has put together a very interesting new online resource that provides information about executive compensation at America’s biggest corporations, including those that have received money through the Troubled Assets Relief Program – the Wall Street bailout. I eagerly searched through the available information there, looking for patterns.

There are a lot of interesting bits of information on the site. For example, Capital One got more than three and a half billion dollars from the bailout So, what’s in your wallet? Maybe it’s a nasty, corrupt corporation that’s cheating the US government, if you’ve got a Capital One credit card… and maybe not. Three and a half billion dollars is a lot of government money for a financial services company that advertises itself as having a credit card that can protect its members from vikings wearing horned helmets. On the other hand, the CEO of the Capitol One Financial Corporation took a salary of $68,344 last year.

I decided to take a look at the interaction between CEO pay and bailout money received, with the goal of identifying the 10 worst (most CEO wasteful) bailout recipients and the 10 best (most efficient with CEO pay). The following are the two lists I came up with. Next to the company’s name is the number of cents per bailout dollar that went to pay the CEO’s salary (in 2008 or 2007, whichever is the most recent year for which CEO pay is available).

You’ll see that, for Capitol One, I wrote down almost zero. That’s because only two thousandths of every penny of bailout money went to the CEO of Capitol One. The same is true of Morgan Stanley, Bank of America, AIG and Wells Fargo. These companies appear to have been relatively frugal of late, at least when it comes to comparing what they pay their CEOs and what they have received in bailout money.

Sterling Bancorp, on the other hand, appears quite wasteful by this measure, spending almost six and a half cents of every dollar it would receive in the bailout on its CEO. For a company to spend that much on its CEO seems quite out of hand.

The 10 Best Of The Bailout:

Capital One Financial Corporation – almost zero
Morgan Stanley – almost zero
Bank of America Corporation – almost zero
American International Group, Inc. – almost zero
Wells Fargo & Company – almost zero
Citigroup Inc. – $0.001
Fifth Third Bancorp – $0.001
U.S. Bancorp – $0.001
Zions Bancorporation – $0.001
JPMorgan Chase & Co. – $0.001

The 10 Worst of the Bailout:

Sterling Bancorp – $0.064
Intervest Bancshares Corporation – $0.042
Citizens First Bancorp, Inc. – $0.040
FirstMerit Corporation – $0.039
Central Pacific Financial Corp. – $0.037
OceanFirst Financial Corp., Inc. – $0.036
Indiana Community Bancorp – $0.034
Center Financial Corporation – $0.029
Berkshire Hills Bancorp, Inc. – $0.027
CenterState Banks of Florida, Inc. – $0.026

Standing back at these lists, however, and considering the real stories behind these corporations, it occurred to me that these numbers may mean less than what they seem. Is it okay for Capital One to have received over 3 and a half billion dollars in bailout money, just because its CEO took a big pay cut? Maybe, and maybe not. Maybe Capital One paid its other executives huge salaries, or wasted money in other ways.

On the other hand, is it a mark of efficiency for a relatively small company, which pays its CEO relatively low on the scale we see amongst the TARP recipient corporations, to get a fairly big bailout? Well, that depends – on what the bailout was used for, and what made the bailout necessary in the first place.

Searching and sifting through these statistics, the thought that occurred to me most strongly is that the relative ethical worthiness of these corporations can’t be adequately judged with just a couple of different numbers describing limited aspects of their performance. On the other hand, it’s important to remember that each and every one of these corporations, even Capital One, has set itself apart by coming to the government with cap in hand, begging for money. In that respect, these corporations are all remarkable failures.

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