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Wall Street

What Wall Streeters Took Off the Table

Research & Commentary
March 13, 2011


The financial industry meltdown has bestowed upon profs at business schools a wondrous gift: a life-time supply of fascinating data to burrow their way through.

Two respected scholars — from the University of Colorado and the University of New Hampshire — have just emerged from this burrowing with some jaw-dropping figures on the total payoff that went to America’s top high-finance CEOs in the eight years before the U.S. economy crashed in 2008.

This new analysis from Sanjai Bhagat and Brian Bolton details the pay picture at the 14 financial biggies that have all now become notorious household names, outfits that range from JP Morgan Chase to Countrywide Financial.

From 2000 through 2008, Bhagat and Bolton calculate, the CEOs at these 14 institutions collected a combined $891 million in cash compensation. They also sold off — in 2,048 separate transactions — shares of their institution’s stock they held in their own personal portfolios.

These transactions helped the CEOs at America’s 14 financial giants net nearly $1.8 billion above and beyond their straight cash compensation. All combined, between straight cash and personal profits from stock trades, these CEOs stuffed an average $190 million each into their pockets from 2000 through 2008.

What did the shareholders in their 14 institutions receive? Not much. In fact, shareholders who held shares in these 14 companies for the entire 2000-2008 period ended up with a negative 24.8 percent cumulative portfolio return.

Let that sink in a moment. The CEOs of America’s 14 financial giants together pocketed almost $2.7 billion at the same time their shareholders were losing money and the U.S. economy, as a whole, was sinking into a “Great Recession.”

These CEOs did, to be sure, “lose” money, too, when the stock market nose-dived in 2008. But that loss would only show up on paper, in a lower value for the shares they held of their own firm’s stock that these CEOs hadn’t yet unloaded.

This paper loss would prove fleeting. Share value at most financial giants has jumped markedly since 2008, thanks to the bailout generosity of U.S. taxpayers.

Wall Street,
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