Clearing up the confusion of the bonuses issue

Written by Biloxi

I had read late yesterday about the uproar of President Obama's statement concerning the recent Wall Street bankers' bonuses. Many of the blogs and media took Obama's statement out of context including Paul Krugman who called Obama's comment on the CEO bonuses 'clueless.' Click here.

Deputy communications director, provides a transcript of Obama's remarks:

What did the President actually say during the interview?

"I, like most of the American people, don't begrudge people success or wealth. That's part of the free market system. I do think that the compensation packages that we've seen over the last decade at least have not matched up always to performance. I think that shareholders often times have not had any significant say in the pay structures for CEOs."

When asked whether seventeen million dollars is a lot for Main Street to stomach, he expressed shock at the size of the compensation and called for the same actions that are a part of the comprehensive financial reform proposal that has been working its way through Congress:

"Listen, $17 million is an extraordinary amount of money. Of course, there are some baseball players who are making more than that who don't get to the World Series either. So I'm shocked by that as well. I guess the main principle we want to promote is a simple principle of "say on pay," that shareholders have a chance to actually scrutinize what CEOs are getting paid. And I think that serves as a restraint and helps align performance with pay. The other thing we do think is the more that pay comes in the form of stock that requires proven performance over a certain period of time as opposed to quarterly earnings is a fairer way of measuring CEOs' success and ultimately will make the performance of American businesses better."

Most folks don't understand that we still have a free market system in this country and free enterprise. Small businesses were and still are the backbone of this country. Many of the corporations were small businesses once upon a time by the founders. Unfortunately, the bigger that the corporation has become, the more greed came to surface. Certainly, the creator of Walmart Sam Walton would certainly roll over his grave on what his empire has become thaks tp his family.

As a shareholder for two companies, CEOs' salaries and stocks are shared to shareholders and not made public. But, I have to agree with Obama that shareholders need more rights to scrutinize CEOs will excessive compensation, measure CEOs' performances quarterly and tie their compensations with both their performances as well as the company.

One thing to point out on the outrage by the public and the media is that CEOs bonuses of JP Morgan Chase Jamie Dimon and Goldman Sachs Lloyd Blankfein were not cash bonuses but preferred stock which was valued if cashed.

This year, Dimon collected nearly 200,000 shares of restricted stock and more than a half million in options valued nearly sixteen million dollars. Dimon did not receive a cash bonus this year but in 2009 he received preferred stock valued at 17 million.

This year, Blankfein received 58,381 restricted stock units. A third of these convert into shares in January 2011, another third convert in January 2012 and the rest convert in January 2013. The stock then can't be sold until January 2015. According to the firm, the stock units were the only discretionary compensation Blankfein got for 2009. he received no bonus in 2008 yet in 2007, he received a $68 million bonus and $26.8 million of that was in cash.

Is it fair that the Wall Street CEOs received these ridiculous bonuses? No. Is it legal? Yes, but it is up to the shareholders to hold all CEOs accountable and tie their paychecks to performances of the company. President Obama is not the ultimate shareholder of the Wall Street fat cats.

Finally, I receive this bit of news as I spoke to soon on this issue. According to Business Insider, it looks like the shareholders of JP Morgan Chase and credit card company have a chance to vote on executive compensation, including salary, bonuses, and benefits. It is my hope that other Wall Street corporations adopt the same "Say on pay" measure.