Acts of Contrition
Bank CEO salaries are being capped, auto executives are groveling, and angry taxpayers are picketing the homes of wealthy executives like French revolutionaries calling for Marie Antoinette's head. Increasingly, CEOs are responding by giving back jets and bonuses, taking symbolic pay cuts, and forgoing trips. With government bailout money footing the bills these days, doing without is all the rage.
Some CEOs are voluntarily cutting frills and bonuses in well-publicized displays of sober fiscal responsibility. Others return such perks only after being caught with their hands in the TARP jar. The sincerity of the giveback isn't always clear, and what some execs hold on to is often more telling than what they give up.
But the message certainly is clear: It's payback time.
1. The Buck Stops Here
What they're giving up: Nine-figure paychecks for one-figure paychecks
Who: In a gesture that some see as proof that he understands the "new reality" and others see as the oldest stunt in the CEO playbook, Citigroup CEO Vikram Pandit pledged he will only pay himself a symbolic $1 a year and no bonus until the company is in the black again. These days, that's just about enough to buy one share of Citi's plummeting stock. Pandit will be joined in the dollar store by General Motors CEO Rick Wagoner, Ford CEO Alan Mulally and Chrysler CEO Robert Nardelli, who has been way ahead of the trend, paying himself $1 a year since 2007. But it's not all about the Washingtons for every CEO. Asked by a shareholder if he would take a $1 salary, Bank of America's Kenneth Lewis noted that the bank earned $5.8 billion during the first nine months of 2008 and flat-out said, "No."
2. A Hard Landing
What they're giving up: Golden parachutes
Who: Parachuting executives at Pfizer had their wings clipped when the pharmaceutical company capped severance packages for top officers terminated without cause. It may no longer be quite the sky-high executive pay they're used to, but the scaled back severances will still amount to at least a few million dollars for some officers and nearly $10 million for chief executive Jeffrey Kindler. Geronimo!
3. The Porcelain Devil
What they're giving up: Fancy toilets
Who: As Masters of the Universe everywhere have been toppled from their Wall Street thrones, they are also having to downgrade their porcelain thrones. For $35,000 though, former Merrill Lynch CEO John Thain's office toilet may as well have been diamond-encrusted. Thain, now formerly of Bank of America, was forced to return the $1.2 million spent to redecorate his office and several conference rooms, including the cost of the toilet and $87,000 for a rug. He is now being investigated for flushing away billions in bonuses to Merrill Lynch employees just before Bank of America bought them out with the help of $45 billion in taxpayer-funded TARP money.
4. Your Flight Has Been Canceled
Who: Citigroup was bumped to commercial class in December after the New York Post caught the heavily subsidized bank trying to purchase a new $50 million corporate jet. The company quickly grounded those plans and announced that, back in August, former CEO Sandy Weill had voluntarily agreed to give up all the perks of his 2006 retirement package, including his use of company jets, effective April 2009. Just a few days later, Weill was forced to reimburse the company for using the Bombardier BD 700 Global Express to fly his family to Cabo for the holidays.
Meanwhile, Hewlett-Packard has decided to limit the amount of extra pay it will give to company executives for personal use of their aircraft, and G.M. and Ford have pledged to sell off their fleet of jets amid reports that the number of private jets up for resale has doubled since last fall.
What they're giving up: Past, present, and future bonuses
Who: GE's chief executive, Jeffrey R. Immelt, who declined his 2008 bonus and his $11.7 million long-term performance award, is joined by chiefs at most big banks, including JPMorgan Chase's Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs' Lloyd Blankfein, and Bank of America Corp.'s Kenneth Lewis among CEOs who won't receive a bonus for 2008. Considering 2008 was such a dismal year, however, sacrificing last year's bonus is a hollow gesture, a bit like giving up cigarettes when you don't smoke in the first place.
In a slightly more meaningful move, Ford executives cut their own pay for the next two years and suspended bonuses for salaried workers, Motorola slashed 2009 benefits for its top execs and, in perhaps a misplaced act of penance but a semi-selfless one all the same, TD Bank CEO Ed Clark donated $3 million of his bonus to charity while keeping the other $8 million.
Others haven't been so eager to give up their big bonuses. Nationwide Mutual Insurance Company CEO Jerry Jurgenson was stiffed by the board of directors on a bonus for his work in 2008 on a Wednesday and resigned on a Thursday.
You can always count on the Canadians to do the right thing, though. Gordon Nixon, head of Royal Bank of Canada, was the first to announce he was returning $5 million of his bonus in a slew of Canadian banker executive pay givebacks that included Bill Downe of BMO's sacrifice of $4.1 million and Gerry McCaughey of CIBC's waiver of $1.4 million.
6. Corporate Staycations
What they're giving up: Trips to Sin City, Hawaii, the Alps
Who: When they weren't crash-landing in the Hudson River, bankers were cutting travel expenses this year. CEOs of several banks, including Bank of America, canceled plans to attend the World Economic Forum at Davos, Wells Fargo called off a conference in Las Vegas, and Citi nixed outings to posh destinations in Maui, Puerto Rico and ski resorts in Colorado typically awarded to its top brokers.
7. Subway Bound
What they're giving up: Town car service
Who: After Goldman Sachs CEO Lloyd Blankfein was scolded for the $233,053 he spends on private car and driver benefits, the company scrapped holiday parties and made its New York staff wait until 10 p.m. - one hour later - to get rides home with the company's car service.
8. What's in a Name?
What they're giving up: Golf sponsorships
Who: When Wells Fargo purchased Wachovia it also bought the sponsorship of one of the PGA Tour's most successful tournaments, the Wachovia Championship at Charlotte's Quail Hollow Club. To avoid seeming frivolous with its TARP money, Wells renamed the tournament "Quail Hollow Championship," but will continue to sponsor it through 2014 as it is contractually bound to do. Appearance is everything, you know.
9. We Don't Need Your Stinkin' Money
What they're giving up: TARP funds
Who: TARP recipient Northern Trust promised to pay the government back after it received a hailstorm of criticism for treating guests to accommodations in the Beverly Wilshire hotel, private concerts by Sheryl Crow, and Tiffany gift bags at a Los Angeles PGA golf event it signed on to sponsor in 2007. US Bancorp also promised to pay Uncle Sam back, according to Rep. Barney Frank, and TCF Financial Corp, Iberiabank Corp, and Sussex Bancorp already gave back TARP funds.
The irony, of course, is that without the TARP money they are free to pay outrageous salaries, go on golf junkets, reward themselves bonuses, and ride around in black town cars to their hearts content.
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