Let me first show the company that continually does it the right way, and still makes a fair profit for its stockholders.....Berkshire Hathaway.
From reviewing its Proxy Statement filed with the SEC, Omaha, Nebraska-based Berkshire Hathaway's two top executives.....Warren Buffett and Charlie Munger.....both got paid a meager $100,000 in 2011. And neither of them got any Stock Awards or Stock Option Awards.
Also, Berkshire Hathaway has 10 Directors, who were paid a grand total of $46,400 in 2011. As a comparison, Occidental Petroleum's Directors had Total Compensation in 2011 of $8,387,000, or 181 times what Berkshire Hathaway's Directors were paid.
Now let me show you a company that doesn't have its executive compensation right.
Indianapolis, Indiana based Simon Property Group is a large Real Estate Investment Trust (REIT). It is very heavy in Shopping Centers, and very successful at it. It makes a nice profit, but nothing even close to what the top companies in the US make. Its CEO is David Simon.
From a review of its Proxy Statement, David Simon received Stock Awards in 2011 which were worth $131,940,000. I'm not kidding, he got nearly $132 mil in Stock Awards in one year. From my review of many Proxy Statements so far, I have only run across one CEO who received more in Stock Awards in 2011, and he is the CEO of Apple.
But it's not just Simon Property Group. As you can see from the chart below, there are many Big Financial Corps which are giving extravagant Stock Awards and Stock Option Awards.
Now granted some of the seemingly higher Stock and Stock Option Awards can probably be justified, like for instance those given to the CEO and the President of BlackRock, which has consistently done just wonders with its investments, in both good times and bad times. And Mr. Benmosche has done miraculous work resuscitating AIG, to the clear substantial economic benefit of all US taxpayers.
But there are many others where these Stock Awards are clearly extravagant. After all, many of the below Big Financial Corps would now be either bankrupt, or very close to it, if it were not for the Obama Administration, ably assisted by the Fed, financially resurrecting them from the dead after the financial meltdown.
So what's the big deal? Who could possibly be harmed by this extremely extravagant spending by Big Financial Corps?
Well, smaller businesses and individuals, both borrowing from Big Financial Corps, would be helped immensely if interest rates charged weren't so high. And the same goes for late fees. Further, underwater homeowners would love to have their mortgages refinanced at the current lower interest rates, but many Big Financial Corps are greedily refusing to allow this. And shopping center lessees would love to see their rents lowered. And policy holders would love to have their insurance premiums reduced. And investors would love to have their investment fees reduced.
If these Big Financial Corps didn't award such extravagant Stock Awards and Stock Option Awards, and instead used the money to reduce what it charges its customers, then many smaller businesses and individuals would derive huge economic benefits, including Credit Card customers and Home Mortgage customers.
But another thing that bothers me here is why in the world should the US Government, and thus US taxpayers, be funding a good chunk of these extravagant costs? For instance, Simon Property Group, being a non-taxable REIT, will be passing through this extravagant Stock Award, which its high-income owners will be getting a US Federal Income Tax Deduction at a 39.6% tax benefit rate at the individual level, starting in 2013. That's not right, not even close to being right.
Thus, my recommendation here is for all Big Financial Corps, as well as pass through individuals of REITs, to have their US Federal Income Tax Benefit for all Stock Awards and Stock Option Awards of Big Financial Corps and REITs be limited to a maximum 20% Tax Rate for these Awards given to all highly-paid employees of Big Financial Corps and REITs who had Total Compensation of more than $200,000 earned in the applicable year.
Below here are the Salary and Stock Awards and Stock Option Awards Compensation Disclosures in the most recent Proxy Statements for mainly just the CEOs of the larger Big Financial Corps.
| Ratio of | |||||
| 2011 | Stock and | ||||
| 2011 | Stock and | Stock Option | |||
| Base | Stock Option | Awards to | |||
| Corp | Position | Executive | Salary | Awards | Base Salary |
| thousand $s | thousand $s | ||||
| Big Financial Corps | |||||
| Big 6 | |||||
| JPMorgan Chase | CEO | Dimon | 1,417 | 17,000 | 12.0 |
| JPMorgan Chase | Chief Investment Officer | Drew | 729 | 9,517 | 13.1 |
| JPMorgan Chase | CEO Asset Management | Erdoes | 729 | 9,925 | 13.6 |
| JPMorgan Chase | CEO Investment Bank | Staley | 729 | 11,125 | 15.3 |
| Wells Fargo | CEO | Stumpf | 2,800 | 12,000 | 4.3 |
| Bank of America | CEO | Moynihan | 950 | 6,112 | 6.4 |
| Bank of America | Co Chief Operating Offcr | Montag | 850 | 10,569 | 12.4 |
| Citigroup | CEO | Pandit | 1,671 | 7,840 | 4.7 |
| Goldman Sachs | CEO | Blankfein | 2,000 | 10,710 | 5.4 |
| Goldman Sachs | President | Cohn | 1,850 | 10,710 | 5.8 |
| Goldman Sachs | CFO | Vincar | 1,850 | 10,710 | 5.8 |
| Goldman Sachs | Vice Chairman | Evans | 1,850 | 10,710 | 5.8 |
| Goldman Sachs | Vice Chairman | Weinberg | 1,850 | 10,710 | 5.8 |
| Morgan Stanley | CEO | Gorman | 800 | 9,443 | 11.8 |
| Total Big 6 | 20,075 | 147,081 | 7.3 | ||
| Big National/Regional Banks | |||||
| US Bancorp | CEO | Davis | 975 | 5,500 | 5.6 |
| PNC Financial | CEO | Rohr | 1,169 | 8,861 | 7.6 |
| Capital One Financial | CEO | Fairbank | 0 | 18,504 | NA |
| Bank New York Mellon | CEO | Hassell | 867 | 5,004 | 5.8 |
| Bank New York Mellon | CEO Investment Mgt | Arledge | 600 | 11,256 | 18.8 |
| State Street Corp | CEO | Hooley | 1,000 | 8,077 | 8.1 |
| Northern Trust | CEO | Waddell | 956 | 7,582 | 7.9 |
| Total National/Regional Banks | 5,567 | 64,784 | 11.6 | ||
| Big Credit Card Corps | |||||
| American Express | CEO | Chenault | 2,000 | 17,467 | 8.7 |
| Visa | CEO | Saunders | 950 | 6,820 | 7.2 |
| Discover Financial Services | CEO | Nelms | 1,000 | 9,628 | 9.6 |
| MasterCard | CEO | Banga | 900 | 4,950 | 5.5 |
| Total Credit Card Corps | 4,850 | 38,865 | 8.0 | ||
| Security Brokers/Investment Advice | |||||
| BlackRock | CEO | Fink | 500 | 13,061 | 26.1 |
| BlackRock | President | Kapito | 400 | 10,126 | 25.3 |
| Franklin Resources | CEO | Johnson | 780 | 6,350 | 8.1 |
| Schwab | CEO | Bettinger | 900 | 6,500 | 7.2 |
| Ameriprise Financial | CEO | Cracchiolo | 950 | 5,657 | 6.0 |
| Total Security Brokers/Investment Advice | 3,530 | 41,694 | 11.8 | ||
| Big Insurance | |||||
| Conglomerate | |||||
| Berkshire Hathaway | CEO | Buffett | 100 | 0 | 0.0 |
| Berkshire Hathaway | Vice Chairman | Munger | 100 | 0 | 0.0 |
| Berkshire Hathaway | CFO | Hamburg | 963 | 0 | 0.0 |
| AIG | CEO | Benmosche | 3,000 | 10,933 | 3.6 |
| Property Casualty | |||||
| Travelers | CEO | Fishman | 1,000 | 10,251 | 10.3 |
| Chubb | CEO | Finnegan | 1,325 | 7,955 | 6.0 |
| Allstate | CEO | Wilson | 1,100 | 6,600 | 6.0 |
| Progressive | CEO | Renwick | 750 | 7,500 | 10.0 |
| Ace Ltd | CEO | Greenberg | 1,200 | 10,167 | 8.5 |
| Hartford Financial Services | CEO | McGee | 1,100 | 6,500 | 5.9 |
| Life Insurance | |||||
| MetLife | CEO | Kandarian | 879 | 6,630 | 7.5 |
| MetLife | Former CEO | Henrikson | 833 | 10,192 | 12.2 |
| Prudential Financial | CEO | Strangfeld | 1,400 | 6,802 | 4.9 |
| Lincoln National | CEO | Glass | 1,075 | 6,245 | 5.8 |
| Other Insurance | |||||
| AFLAC | CEO | Amos | 1,399 | 8,936 | 6.4 |
| AON | CEO | Case | 1,500 | 9,168 | 6.1 |
| AON | CEO-Risk Solutions | McGill | 1,100 | 9,380 | 8.5 |
| Marsh & McLennan | CEO | Duperreault | 1,000 | 8,250 | 8.3 |
| Total All Big Insurance | 19,824 | 125,509 | 6.3 | ||
| REITs | |||||
| Simon Property Group | CEO | Simon | 1,212 | 131,940 | 108.9 |
| Public Storage | CEO | Havner | 1,000 | 0 | 0.0 |
| HCP | CEO | Flaherty | 600 | 11,687 | 19.5 |
| Vornado Realty Trust | Chairman | Roth | 1,000 | 6,800 | 6.8 |
| Vornado Realty Trust | CEO | Fascitelli | 1,000 | 6,800 | 6.8 |
| General Growth Properties | CEO (2010 Amounts) | Mathrani | 0 | 30,680 | NA |
| Ventas | CEO | Cafaro | 915 | 14,526 | 15.9 |
| Boston Properties | CEO | Zuckerman | 950 | 6,067 | 6.4 |
| Equity Residential | CEO | Neithercut | 625 | 9,364 | 15.0 |
| Federal Realty Trust | CEO | Wood | 850 | 4,037 | 4.7 |
| Health Care REIT | CEO | Chapman | 700 | 4,413 | 6.3 |
| Total REITs | 8,852 | 226,314 | 25.6 | ||
| Grand Total All Big Financial Corps | 62,698 | 644,247 | 10.3 | ||
