Some would say that it only takes something to happen twice to make it a trend -- at The Deal we usually prefer three as the rule of thumb. So, with the the outgoing chief executives at the Royal Bank of Scotland plc and HBOS plc announcing recently they would forgo their golden parachutes, are these occurrences a growing trend or a surprising anomaly that will wither away with better times?
Continue reading below
Time will tell. But, for now, political and shareholder sentiment seem to be pushing toward reducing or eliminating executive compensation for these departing European financial executives, whose companies are left in shambles.
Shareholders seem to be satisfied that CEO and chairman of HBOS Andy Hornby will leave his positions without a contractual agreement that guarantees him £940,000 ($1.6 million) and an undetermined amount of a possible bonus. Hornby's bonus was £700,000 in 2007.
Meanwhile, no one is complaining that Royal Bank of Scotland departing CEO Fred Goodwin will not take a bonus either when he leaves at the end of 2008. Hornsby will continue to be paid his salary until his replacement Stephen Hester takes over.
Across the Atlantic in the U.S., financial executives have been taking their shots for receiving unusually large compensations while leaving their companies in a pile of rubble as well. With the near collapse of the U.S. financial system and the global economy destined to be in a recession, Americans seem overwhelmingly adamant to limiting or eliminating executive compensation at these failing firms. And why not? Stock market turmoil caused by the failure of a multitude of American financial services firms has wiped out roughly $2 trillion of Americans' retirement savings over the past 15 months, according to the Congressional Budget Office.
Maybe, for now, on both sides of the Atlantic, the golden parachute will only be a copper one or possible no safety net at all for these executives at the failing financials. And if that's the case, for the shareholder, it may be the only savings they see in whatever is left of their investments. ... - Gerald Magpily
Dealscape: Rewarding Wall Street's failures
