The study revealed that many of the executives at financial institutions stand to profit handsomely from U.S. taxpayers’ handouts. These firms granted new stock awards to their executives earlier this year as their share prices tanked, and, now, thanks to the bailout, the value of these awards has grown. Based on rising stock prices, the top five executives at 10 of the 20 bailout firms that have reported details of stock options granted in early 2009 have reaped a combined increase in the value of their stock options of nearly $90 million.
The Institute is also openly critical of the US government’s response to the banking crisis and attempts to control boardroom pay. “The restrictions on CEO pay put in place since the bailout began do not in any fundamental way challenge the excessive pay rates that have become, over the past 30 years, standard operating practice in America’s financial and corporate boardrooms,” the Institute said.
Commenting on the role of shareholders and the independence of compensation committees, IPS Director John Cavanagh said: “Governance problems do need to be resolved, but unless we also address more fundamental questions – about the overall size of executive pay, about the gap between the rewards that executives and workers are receiving – the executive pay bubble will most likely continue to inflate.”
“Public officials in Congress and the White House hold the pin that could pop the executive pay bubble,” said IPS Senior Scholar Chuck Collins. “They have so far failed to use it.”