Intersting Blog posting on Exec Comp and the Banking crisis - July 23, 2008

Executive Investigator

 Wednesday, July 23, 2008

From Seeking Alpha's Richard Shaw:

Executive
compensation is a difficult issue.  Although we grant that the
challenge in designing a reasonable system that works in all seasons is
daunting, in the net we come down on the side that the compensation is
too often too great.

We believe that the incentives are not
adequately designed by objective third-parties  — highly compensated
directors who like their pay and serve at the pleasure of the CEO are
not objective third parties.

Now with the moral hazard element
associated with government rescue of financial institutions, the
possibility of truly unjust enrichment of banking executives looms
large.

Many bank executives received large salaries and large
bonuses for the growth and illusory short-term profits associated with
mortgage lending and mortgage securitization that landed us in the
current mess.

Some lost their jobs as a result of massive losses
of shareholder equity, while being shoved out the door with huge sums
of severance pay.

Now we face the issue of executive stock
options issued recently during this period of deeply depressed bank
stock prices.  Will they balloon into great riches for executives who
happen to be at the helm when the Fed, the Treasury, the Congress and
ultimately the tax payers bail-out the banking system?