Why our schools will not have funds :AP

AP study finds $1.6B went to bailed-out bank execs

FRANK BASS AND RITA BEAMISH | December 21, 2008 10:07 PM EST |

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits in the calendar year 2007, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for 53 of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

Rep. Barney Frank, chairman of the House Financial Services committee and a long-standing critic of executive largesse, said the bonuses tallied by the AP review amount to a bribe "to get them to do the jobs for which they are well paid in the first place.

"Most of us sign on to do jobs and we do them best we can," said Frank, a Massachusetts Democrat. "We're told that some of the most highly paid people in executive positions are different. They need extra money to be motivated!"

The AP compiled total compensation based on annual reports that the banks file with the Securities and Exchange Commission. The 116 banks have so far received $188 billion in taxpayer help. Among the findings:

_The average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits.

Story continues below
_Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million.

This year, Goldman will forgo cash and stock bonuses for its seven top-paid executives. They will work for their base salaries of $600,000, the company said. Facing increasing concern by its own shareholders on executive payments, the company described its pay plan last spring as essential to retain and motivate executives "whose efforts and judgments are vital to our continued success, by setting their compensation at appropriate and competitive levels." Goldman spokesman Ed Canaday declined to comment beyond that written report.

The New York-based company on Dec. 16 reported its first quarterly loss since it went public in 1999. It received $10 billion in taxpayer money on Oct. 28.

_Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about. Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options. The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14.

_John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, took the reins of the company in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options.

Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.

The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Assets Relief Program (TARP), a law designed to buy bad mortgages and other troubled assets. Last month, the Bush administration changed the program's goals, instructing the Treasury Department to pump tax dollars directly into banks in a bid to prevent wholesale economic collapse.

The program set restrictions on some executive compensation for participating banks, but did not limit salaries and bonuses unless they had the effect of encouraging excessive risk to the institution. Banks were barred from giving golden parachutes to departing executives and deducting some executive pay for tax purposes.

Banks that got bailout funds also paid out millions for home security systems, private chauffeured cars, and club dues. Some banks even paid for financial advisers. Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay personal financial planners.

At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said.

Goldman Sachs' tab for leased cars and drivers ran as high as $233,000 per executive. The firm told its shareholders this year that financial counseling and chauffeurs are important in giving executives more time to focus on their jobs.

JPMorgan Chase chairman James Dimon ran up a $211,182 private jet travel tab last year when his family lived in Chicago and he was commuting to New York. The company got $25 billion in bailout funds.

Banks cite security to justify personal use of company aircraft for some executives. But Rep. Brad Sherman, D-Calif., questioned that rationale, saying executives visit many locations more vulnerable than the nation's security-conscious commercial air terminals.

Sherman, a member of the House Financial Services Committee, said pay excesses undermine development of good bank economic policies and promote an escalating pay spiral among competing financial institutions _ something particularly hard to take when banks then ask for rescue money.

He wants them to come before Congress, like the automakers did, and spell out their spending plans for bailout funds.

"The tougher we are on the executives that come to Washington, the fewer will come for a bailout," he said.

Legislation seeks to take back the CSU

Capitol bid to rein in CSU execs
Legislation would add oversight of the state university system

Jim Doyle, Chronicle Staff Writer
Thursday, March 1, 2007
State lawmakers have introduced legislation calling for more governmental oversight of the California State University system, which has come under criticism after reports that some of its top executives were receiving hundreds of thousands of dollars in extra compensation without public disclosure.

The oversight plan, which includes adding two legislators or their appointees to the CSU Board of Trustees and requires that executive contracts be approved in public session, comes in response to The Chronicle's reports on special compensation packages for current and former executives of the nation's largest university system.

"This is an effort to earn back the public's trust," said state Assemblyman Anthony Portantino, D-La Cañada Flintridge (Los Angeles County), during a news conference Wednesday at the Capitol in Sacramento. "The general public must have trust in the institutions of higher learning where we put our children."

Portantino, the bill's author, cited the newspaper's two-day series in July as the genesis of his legislation. The stories revealed that as much as $4 million in special perks and extra compensation has been paid to departing CSU officials during the past decade without public disclosure by the chancellor or Board of Trustees.

Beneficiaries included those who remain on the payroll while taking jobs elsewhere and others who receive hundreds of thousands of dollars in consulting contracts from the CSU after their retirement. For example, former executives Peter P. Smith of CSU Monterey Bay and CSU Executive Vice Chancellor David Spence took paid transitional leaves in 2005, a perk that enabled them to receive most of their six-figure salaries for a year after they left office and took six-figure jobs elsewhere.

The legislation, introduced last week as The California State University Reform, Trust and Responsibility Act, would authorize the appointment of two state legislators or their designees to the CSU Board of Trustees. The additional two members would be appointed by the state Senate and Assembly.

Clara Potes-Fellow, a CSU spokeswoman, said the university system has not yet taken a position on the bill.

Portantino, who chairs the Assembly Higher Education Committee, said the bill would restore confidence in the CSU by "giving the Legislature a voice on the Board of Trustees, open up future meetings on executive compensation and eliminate any suggestion of impropriety ..."

It would also give the governor and lieutenant governor -- who hold ex officio positions on the 25-member board -- seats on the board. Each could designate someone to attend CSU meetings on their behalf.

The bill calls for the trustees to approve all executive contracts in public session and reveal all benefits, not just salaries and housing. It also requires CSU executives who are paid for professorships to actually teach classes, and that their compensation could not exceed the amount a full-time professor in the CSU system would be paid for similar teaching duties.

"The priorities are upside down when a handful of top executives are receiving record raises at the same time that faculty are struggling to negotiate fair contracts and students are being hit with tuition increases," said Assemblywoman Julia Brownley, D-Santa Monica, a co-author of the bill. Brownley, who chairs the Assembly Budget Subcommittee on Education, served 12 years on a school board.

State Sen. Gloria Romero, D-Los Angeles, the majority leader and a CSU professor on leave, called the legislation a "very direct and clear message to the chancellor of this university ... the students, and the citizens who share their outrage. Quality education begins in the classroom, not the upper echelons of the ivory tower. The days of trustees operating in the dark of night, giving away additional perks to executives, are over. This is a sunshine bill."

Sen. Leland Yee, D-San Francisco, introduced a bill last month that also aims to compel CSU trustees to meet in public when discussing and deciding executive compensation issues.

Susan Meisenhelder, a CSU professor and statewide political action chairwoman of the California Faculty Association, said the university system's faculty union supports the bill because it will make it more difficult for CSU executives "to further pad their compensation."

She cited a provision of the bill that would require the California Post-Secondary Education Commission to track certain data and report regularly on state funds going toward instruction compared to administration in the CSU system. She said the faculty union has tracked some of these dollars and found that in recent years the percentage of state funds used to pay for CSU instruction has declined while the percentage for CSU administration has increased.

"This is a bill about good government. It's not a partisan bill," Portantino said.

E-mail Jim Doyle at jdoyle@sfchronicle.com.

http://sfgate.com/cgi-bin/article.cgi?f=/chronicle/archive/2007/03/01/BAGO7ODAAF1.DTL