Banks Owe Billions To Executives
Financial giants getting injections of federal cash owed their executives more than $40 billion for past years' pay and pensions as of the end of 2007, a Wall Street Journal analysis shows.
The government is seeking to rein in executive pay at banks getting federal money, and a leading congressman and a state official have demanded that some of them make clear how much they intend to pay in bonuses this year.
But overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces.
The sums are mostly for special executive pensions and deferred compensation, including bonuses, for prior years. Because the liabilities include stock, they are subject to market fluctuation. Given the stock-market decline of this year, some may have fallen substantially.
Some examples: $11.8 billion at Goldman Sachs Group Inc., $8.5 billion at J.P. Morgan Chase & Co., and $10 billion to $12 billion at Morgan Stanley.
Few firms report the size of these debts to their executives. (Goldman is an exception.) In most cases, the Journal calculated them by extrapolating from figures that the firms do have to disclose.
Most firms haven't set aside cash or stock for these IOUs. They are a drag on current earnings and when the executives depart, employers have to pay them out of corporate coffers.
The practice of incurring corporate IOUs for executives' pensions and past pay is perfectly legal and is common in big business, not limited to financial firms. But liabilities grew especially high in the financial industry, with its tradition of lavish pay.
Deferring compensation appeals both to employers, which save cash in the near term, and to executives, who delay taxes and see their deferred-pay accounts grow, sometimes aided by matching contributions. In some cases, firms give top executives high guaranteed returns on these accounts.
The liabilities are an essentially hidden obligation. Even when the debts to their executives total in the billions, most companies lump them into 'other liabilities'; only a few then identify amounts attributable to deferred pay.
The Journal was able to approximate companies' IOUs, in some cases, by looking at an amount they report as deferred tax assets for 'deferred compensation' or 'employee benefits and compensation.' This figure shows how much a company expects to reap in tax benefits when it ultimately pays the executives what it owes them.
J.P. Morgan, for instance, reported a $3.4 billion deferred tax asset for employee benefits in 2007. Assuming a 40% combined federal and state tax rate -- and backing out obligations for retiree health and other items -- implies the bank owed about $8.2 billion to its own executives. A person familiar with the matter confirmed the estimate.
Applying the same technique to Citigroup Inc. yields roughly a $5 billion IOU, primarily for restricted stock of executives and eligible employees. Someone familiar with the matter confirmed the estimate.
The Treasury is infusing $25 billion apiece into J.P. Morgan and Citigroup as it seeks to get credit flowing. In return, the federal government is getting preferred stock in the banks and warrants to buy common shares. The Treasury is injecting $125 billion into nine big banks and making a like amount available for other other banks that apply.
It's imposing some restrictions on how they pay top executives in the future, such as curtailing new 'golden parachutes' and barring a tax deduction for any one person's pay above $500,000. But the rules won't affect what the banks already owe their executives or make these opaque debts more transparent.
Asked about the Journal's calculation, the Treasury said, 'Every bank that accepts money through the Capital Purchase Program must first agree to the compensation restrictions passed by Congress just last month -- and every bank that is receiving money has done so.'
Ellen E. Schultz
以一些公司为例：高盛集团(Goldman Sachs Group Inc.)欠高管118亿美元，摩根大通公司(JPMorgan Chase & Co.)85亿美元，摩根士丹利(Morgan Stanley)100亿-120亿美元。
Fed即将为以后的高管薪酬做出限制，例如缩减所谓的“金色降落伞”(golden parachute, 即高管离职补偿金)，限制薪酬超过50万美元的雇员的所得税减税等。但是这些规定影响不到这些银行已经开给高管的欠条，也无法使得这笔模模糊糊的欠款变得更为透明。
Ellen E. Schultz