Bonuses Killed Bear Stearns & Lehman Brothers

We’re told that if these firms don’t give big bonuses, they can’t attract the top talent. Well, then let the top talent go work in another country, create a bunch of pretend wealth and ruin their economies.

From Smartmoney:

A trio of Harvard Law School professors have tallied the cash these management teams collected for their performance during the boom years that preceded — caused, really – the bust. The numbers make failure look lucrative. [...]

Bear Stearns halted executive bonuses in 2007, but before it did, [former chief executive James] Cayne received more than $87 million in cash for his efforts from 2000 to 2006. The next four highest-ranking managers together received $239 million. At Lehman, [Richard] Fuld collected cash bonuses of more than $61 million from 2000 to 2007, while his Nos. 2 though 5 got $102 million. That’s about $490 million in total, with compensation committees at both firms attributing the rewards to increases in sales, profits, book value and share price. No funds were confiscated later though so-called claw-back provisions.

The real money was in selling stock, though. From 2000 to 2008, Cayne and his officers cashed in $1.1 billion worth of shares, while Fuld and his sold $850 billion worth. The amounts are net of purchased shares, and all figures are in January 2009 dollars. Put it all together, and the top executives at Bear Stearns and Lehman Brothers received $1.4 billion and $1 billion in cash, respectively. That amount “substantially exceeded the value of the executives’ initial holdings in the beginning of the period,” the authors conclude.

This gives a whole new meaning to the notion of “too big to fail.” I think we can do with a moratorium on windfall bonuses in general from here on out.

Here’s the question: Why aren’t these guys in jail?

Oh, that’s right…because it’s all legal.

Forget I asked.

(Photo: New York Magazine)