Investment Bankers-Why Are The Large Bonuses and Stock Awards Justified

Just as a starting point, notwithstanding all the academic literature, why are multi-million dollar bonuses and stock rewards still being paid out to senior management? As an example, in looking at the stock market performance of two premier investment banks, Goldman Sachs and Morgan Stanley, it has been appalling:

Ten Years

DJIA + 50.59%

MS     -49.92%

GS     +59.78%

Lloyd Blankfein’s variable compensation for the years 2010-2012 was valued at $51.6 million. Gary Cohn’s variable compensation was valued at $49.45 million for the same period. These two senior officers alone garnered almost $100 million in variable  compensation.  Three other senior executives were awarded an additional $144 million in variable compensation. Five executive officers were granted a total of almost a quarter of a billion dollars in variable compensation.

In most corporations this kind of under performance would be rewarded with an exit package. Senior management of these firms continue to extract hundreds of millions of dollars in compensation ostensibly for their management and deal making expertise. Something is missing. Where is the corporate governance that allows these sums to be extracted by under performing companies?

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