US financial institutions owe executives over $40 billion

Amid the uproar over slashing salaries to top management executives, American financial institutions receiving assistance from the Federal
government owe more than 40 billion dollars in pay and pension to its executives up to the end of 2007.

An analysis by The Wall Street Journal showed that financial giants getting cash injections owe over 40 billion dollars for the past year's pay and pension.

The US government recently announced an economic bailout package of 750 billion dollars, which included buying stakes in banks, and once the government becomes a stakeholder, these entities are required to have restrictions on executive pay.

"... Overlooked in these efforts is the total size of debts that financial firms receiving taxpayer assistance previously incurred to their executives, which at some firms exceed what they owe in pensions to their entire work forces," the report pointed out.

The sums are mostly for special executive pension and deferred compensation, including bonuses, for previous years. Because the liabilities include stock, they are subject to market fluctuation. Given the stock-market decline of this year, some may have fallen substantially, it added.

According to the report, the liabilities at Goldman Sachs Group are 11.8 billion dollars, at JPMorgan Chase about 8.5 billion dollars, and at Morgan Stanley 10-12 billion dollars.

The Wall Street Journal said that except Goldman Sachs, few firms report the size of these debts to their executives.

"In most cases, the Journal calculated them by extrapolating from figures that the firms do have to disclose. Most firms haven't set aside cash or stock for these IOUs. They are a drag on current earnings and when the executives depart, employers have to pay them out of the corporate coffers," the report said.

Source: EconomicTimes