Bear Stearns' executive pay - Plaza/Pitchforks edition

By now, everyone's seen this grim number (h/t BondDad):

Pushed to the brink of collapse by the mortgage crisis, Bear Stearns Cos. agreed -- after prodding by the federal government -- to be sold to J.P. Morgan Chase & Co. for the fire-sale price of #2 a share in stock, or about $236 million.

Put it together with this from Friday's NYT's 'Street Scene' page, and it's a rallying cry for pitchforks and torches down at the Plaza Hotel:

Bear's Den

Shares of Bear Stearns may be sinking, but the firm's chairman just put the finishing touches on a high-flying real estate deal.  The chairman, James E. Cayne, paid $25.8 million...

Lessee... where were we?  

The chairman, James E. Cayne, paid $25.8 million, city records show, for a 14th-floor apartment in the Plaza, the storied New York hotel recently converted into high-end condominiums.  Last month, Mr. Cayne closed on a much more modestly priced apartment on the same floor of the Plaza, for which he paid $2.4 million.  Together, the units cost Mr. Cayne and his wife, Patricia, more than $28 million, according to city records.

Bear has been hit hard by the mortgage debacle but mortgages apparently weren't a problem for Mr. Cayne: City records show he didn't take one.  --Peter Edmonston

Shareholders and employees should all be tickled to know that Cayne was well-compensated for his actions to guarantee Bear Stearns' success and could spend 12% (actually 11.8%, but who niggles about $472,000 on a day like today?) of the company value to ride out this financial storm.  Tickled to the point of pitchforks and torches.  

note: I can't find the NYT quote online, but I'm staring at the newsprint version:  March 14, 2008, Page C6, left column of 'Dealbook Extra', bottom of the page.  

•  If his net worth was tied up in BS stock

  he'll be reselling that property shortly.

  Comment on CNBC this morning:  "There are people living near NYC who were worth $100 million last week, who are worth $1 million today."

  Cheers.

  by New Deal democrat on Mon Mar 17, 2008 at 06:33:16 AM PDT

  •  Reading about Bear last night

    I saw that 1/3 of the company stock was owned by employees.

    That stock was worth:

    ~$150 last summer
    ~$90 on New Years
    ~$30 on Friday
    $2 today.

    Ouch.

    by bawbie on Mon Mar 17, 2008 at 06:36:45 AM PDT

    •  Crap...

      I know someone in that boat.  A friend's dad who worked in telecom as a lineman/electrician.  The bulk of his pay went into Lucent and was locked for something like 18 months after retirement.

      He retired just in time to watch (helplessly) as his pension shrank over 90%.

      He's in his 70's and still working.  Says he'll never be able to retire.  Does technical phone work and diagnostics for a local hospital and a few other businesses.

      That was one of the examples that came to mind as I did this diary.  That's what makes me do a slow burn about it: we get screwed, Cayne gets 200 million and a huge suite in the Plaza Hotel.  The whole setup is all so wrong, so very wrong.

      by d2 at 43rdstateblues on Mon Mar 17, 2008 at 06:44:36 AM PDT

      •  I don't even know what to say about this...

        seriously...I'm getting ulcers.

        by bubbalie 517 on Mon Mar 17, 2008 at 06:46:36 AM PDT

        •  It doesn't take a tinfoil hat to know...

          ...that the vaunted 401k was the malevolent tool to cheat working folks out of their retirement and put an end to the New Deal once and for all.  Why do you need a dull, boring, low-return company sponsored pension plan when you can have a 401k, direct all of the investments yourselves, and get rich?  Haven't you seen the TeeVee commercials for the investment houses, with all those vibrant-looking gray-haireds on yachts and shit, enjoying the fruits of their investment prowess, brought to them courtesy of the fine folks at Lehman Bros, Bear Sterns, Merrill Lynch, et. al.?

          by Ken in MN on Mon Mar 17, 2008 at 06:54:15 AM PDT

      •  Of course, when he dies,

        he'll probably get a prime suite in Hell!!!

        by Randall Sherman on Mon Mar 17, 2008 at 06:49:50 AM PDT

    •  Unless they had the foresight...

      ...to sell short on Friday.  By the way, assuming someone did sell Bear stock short last week, how does the trader cover his position now that the company has been swallowed up.  Not that it matters to a poor guy like me, but I was curious about that.

      by Randall Sherman on Mon Mar 17, 2008 at 06:48:40 AM PDT

  •  And isn't that what most stocks today really are?

    BS...

    by Ken in MN on Mon Mar 17, 2008 at 06:55:03 AM PDT

  •  The big head turner is 15 CPW

    A brand new condo which sought to return to the NYC market 12' ceilings and all the luxury of the grand "pre-war" Fifth and Park Avenue apartments, 15 Cenral Park West has been snapped up by numerous 'Forbes 500' richest Americans.  The average unit went for $5 million and the entire project has been sold for over $2 billion.  Units have already been 'flipped' for 100% profit, even though the building is still not finished.  And the developer has offered to buy back many of the units to resell at a higher profit.  It's insane, it's ludicrous, it's revolting, but many of these people will remain unscathed by the current turmoil, having already cashed in on ther golden parachutes, or just plain old sitting on an inheritance.

    by NYFM on Mon Mar 17, 2008 at 07:01:04 AM PDT

    •  I live around the corner from 15 CPW

      We tried to be the nosy folks and check it out. They wanted $1000 just to look. Oh us poor folks.  The only good thing is that there is a Best Buy in the bottom of the tower.  Of course,  I won't be able to afford shopping there soon when milk is $6. Sigh.

      by oak510 on Mon Mar 17, 2008 at 07:37:30 AM PDT

•  Another overpaid executive. n/t

  by boran2 on Mon Mar 17, 2008 at 06:35:05 AM PDT

  •  Apparently he knew he'd be getting a huge

    payraise in the form of taxpayers' dollars.

    Dis. Gus. Ting.

    Where's my Maalox...  

    by bubbalie 517 on Mon Mar 17, 2008 at 06:37:49 AM PDT

    •  Hey! Leave Gus alone, He's my cousin.

      by Jacques on Mon Mar 17, 2008 at 08:17:32 AM PDT

•  tips

  Tips, please.  This pair of stories needs some bigger airplay.  Executive compensation needs some curbs, and this guy's the new poster-child of Executive Pay being out of any sane boundaries.  

  by d2 at 43rdstateblues on Mon Mar 17, 2008 at 06:39:30 AM PDT

  •  Is he, ever!

    Shareholders are losing their shirts, taxpayers are footing the bill and this guy is buying multi-million dollar properties in NYC!

    by bubbalie 517 on Mon Mar 17, 2008 at 06:45:07 AM PDT

  •  Absolutely tipped and recc'd.

    First the demand on these officials should be to give it back. Give back all of their ill-gotten gains. At the same time, we need to investigate what corner-cutting and illegal activity they allowed to happen under their watch. And we should be holding these people accountable.

    But I'm not holding my breath that any of that will happen.

    by blueintheface on Mon Mar 17, 2008 at 06:47:36 AM PDT

  •  apologies

    for accidentally stepping on your tip jar.

    Cheers.

    by New Deal democrat on Mon Mar 17, 2008 at 06:49:19 AM PDT

    •  none needed -- you reminded me I needed one..

      I don't do diaries -- spend all my time maintaining a little blog off in a red corner of cyberspace.   It wasn't until yours plus 2-3 other comments that I went: "Crap... tips!"

      Which is slightly better than my initial six diaries, where things went hours or days before I learned (relearned) there was a concept called a tip char.

      I want ct to create a little 'Your diary posted... you might want to post a freakin tip jar' checkbox option for lurkers like me.

      by d2 at 43rdstateblues on Mon Mar 17, 2008 at 06:53:19 AM PDT

      •  My brother was a poster on DKos

        for almost a year before he discovered he could recommend diaries!  (I rec'd yours, of course)

        by annetteboardman on Mon Mar 17, 2008 at 07:44:10 AM PDT

  •  So What?

    How much Cayne paid for a residence is not relevant to any executive compensation issue. I am too lazy to look it up, but the real issue is how much was he paid in 2007, are there any "claw-back" provisions and how does his actual CASH compensation relate to the transaction value at $2 share? The ratio of the value of his new real estate purchase to the transaction value are two numbers with no direct correlation. This does not need to be recommended, it's sloppy work.

    by VClib on Mon Mar 17, 2008 at 06:49:23 AM PDT

    •  Chutzpah

      It takes some serious chutzpah to say 'I am too lazy' in the same comment where you call someone else on sloppy work.

      I've got a day job.  Making the link between these was all I wanted or could afford the time to do.  But ten secs on google ('cayne executive' got me this link:
      Forbes #9 in 2004: James E Cayce.
      Executive pay plus bonuses accounted for the lion's share of his worth.  And, given his role there spanned more than a decade (and included the dot-com era), and that he was at Bear Stearns for 35 years (and served on no other boards), he's raided the henhouse and got fired with a golden parachute in January '08.

      The man made his fortune off ramping up BS's value, got booted, and his entire company just took a 98% header when the bartab came due.  It is most certainly his god damned fault and the subject of Executive Pay does ring in the rest of our heads, even if you've got selective tinitis.

      I'm going to work... (mutters, stomps off)

      by d2 at 43rdstateblues on Mon Mar 17, 2008 at 07:02:15 AM PDT

      •  Executive Pay

        For the overwhelming period when Cayne was at Bear, including his term at it's CEO, the company was very profitable. And given Wall Street's pay practices it's not surprising that he was very well paid and had accumulated significant wealth by 2004. It is certainly true that the strategic mistakes that have resulted in the firm's steep decline should be on his shoulders, and the class action lawyers will be soon lining up for lead counsel. Assuming for a moment that his golden parachute was not contractually required, comparing his parachute to the transaction value has some relevance in terms of executive compensation. However, how much some really wealthy Wall Street exec pays for a new home has no relevance. The variable to focus on isn't his real estate purchase, that is not related to his job, but the parachute could be a relevant data point that could make your case.

        by VClib on Mon Mar 17, 2008 at 07:19:51 AM PDT

        •  And then, suddenly it wasn't.

          Dropping 170+ to 2 sorta breaks his track record, IMHO.

          Put another way, in 1985 it was at 3-ish.  In other words, he just left the company at a much lower value than several years before he ever became CEO.

          Any good con artist can profit under the loose trust you grant these bastards: as long as the last 90 days don't count, I can run things up incredibly.

          Ok... on to sentence 2: sounds like you agree that this guy exemplifies bad executive pay policies.

          Sentence 3: Strategic?  No, Fiduciary malfeasance.  This is perhaps my central point: as long as corporate responsibility includes taking extreme risks that can bankrupt companies, management will 'wear blinders' to make goals.  They (BSC) did this on purpose.  Just like dems don't buy 'nobody could see this coming' excuses from the Bush administration, I ain't buying 'but he did so well for so long' from you.  Cayne pushed for this, he got it, he needs to be pilloried for it so everyone knows that shareholders will lynch 'em if they do stupid stuff like hyperleveraging financial instruments.

          Sentence 4: Dunno about a literal GP.  Just used the term without such specific intent.  I was talking about his career spanning 35 years making him worth 500 million in BSC stock according to Forbes 2004 (linked elsewhere herein).  That, regardless of contract, is an ill-earned GP of epic proportions.  Ditto the 14th floor of the Plaza hotel.

          Sentence 5: um, I don't resent the rich.  But I resent someone becoming a zillionaire, getting fired, but still having enough cash on hand to buy $28 million apartment suites without incurring debt.  Cratering your employees' retirement plans is criminally short-sighted and selfish, and fully 1/3 of BSC stock is owned by employees.  Some were rich investment bankers and no doubt complicit in this go-go horseshit, but I'm willing to bet that several thousand employees aren't sleeping so well right now because they've just been kicked in the gut and are coming to terms with 'I'll never retire'.

          Sorry, this man's a poster child.  Add in the bonus that he's alive and Ken Lay had the poor taste to die prematurely (as Wesley said: To the Pain), and I say he's THE new poster child for executive pay being out of whack, and deserves great big heapin balls of scorn.  Forever.

          by d2 at 43rdstateblues on Mon Mar 17, 2008 at 08:05:00 PM PDT

•  Isn't the Ny Bear Stearns building worth more?

  2$ per share really wow!.

  by B P Pgh on Mon Mar 17, 2008 at 06:44:22 AM PDT

  •  Probably upside-down

    Doesn't matter if you've got a stack of gold bricks in your basement if you're financially upside-down: if you owe more than you're worth... you're broke, no matter how posh the real estate holdings or how fat your wallet is.  It's all just a matter of time...

    And where some corporations can lock the gates and go to chapter 11 and negotiate their debts down, a bank doing that'd really put the national economy into a tailspin.

    Or so's my understanding of things.  I'm just a computer geek.

    by d2 at 43rdstateblues on Mon Mar 17, 2008 at 06:47:24 AM PDT

    •  Way, way upside down

      Just how upside-down, nobody will know for months or years, until the housing market stabilizes.  That's what the Fed hopes to ride out with our money.

      But Bear's liabilities are in the Billions, the building is worth a very small fraction in any case.

      by spotDawa on Mon Mar 17, 2008 at 06:56:58 AM PDT

    •  So as a stock holder I'd vote no, is the point.

      If I sell the building alone I'd get $8 in Bankruptcy court.

      by B P Pgh on Mon Mar 17, 2008 at 08:10:52 AM PDT

  •  I read somewhere this morning ....

    ... that one of the employees said the building had to be worth $8 a share. I'm trying to remember where I read this so I can provide a link to back that up.

    by highfive on Mon Mar 17, 2008 at 07:29:12 AM PDT

    •  Oh, here you go. Take your pick.

      The Google search list.

      by highfive on Mon Mar 17, 2008 at 07:32:42 AM PDT

•  The kind of reform Democrats need to advocate

  Executives of publicly traded corporations are public servants in the same way that government employees are public servants.  The President's salary is $400,000 per year.  The top civil service jobs - Senior Executive Service (SES) - about 1,600 in all, start at $160,000.  

  CEO's and other corporate bigshots are supposed to be working for their shareholders.  Large companies have hundreds of thousands of shareholders, and anyone in the world with the money has the right to buy a share in a publicly traded company.  CEO's have no more right to loot the property of their shareholders any more than government employees have the right to loot the public treasury paid for by us taxpayers.

  It's time to impose a 90% tax on corporate salaries in publicly traded companies, on any salary above $400,000 per year.  

  by Navy Vet Terp on Mon Mar 17, 2008 at 06:56:27 AM PDT

  •  They will go private

    This is a profoundly bad idea. The marginal rates of taxation at various levels of income is a legitimate public policy question. However, having different tax rates for executives of public and private companies makes no sense. All the best executives will work for private companies and many of our best public companies will go private. For the past 20 years or so there has been a limit on how much public companies can pay an executive and deduct that expense for tax purposes. The amount is $1 million, unless the pay is directly tied to performance. Public companies are not like the government in any way. If you don't like how a company is run, or how it pays the executives, you can sell your shares today and invest them somewhere else.  

    by VClib on Mon Mar 17, 2008 at 07:46:21 AM PDT

    •  OK - I withdraw my proposal n/t

      by Navy Vet Terp on Mon Mar 17, 2008 at 10:40:27 AM PDT

•  All the more reason...

  ...for us to make the Bush tax cuts permanent. Think about how much worse things would be if not for those!

  by brittain33 on Mon Mar 17, 2008 at 06:59:20 AM PDT