Top executives at financial firms that have received the lion’s share of federal aid during the credit crisis could reap millions of dollars thanks to stock options granted in 2009, according to a study released Wednesday.
“Executive pay at top U.S. financial firms stands poised for spectacularly rapid recovery,” said the Institute for Policy Studies in its annual compensation survey. “One reason: These firms lavished new stock awards on their executives earlier this year, as share prices hit bottom, and these awards — thanks to the bailout — have inflated in value.”
Financial shares have led the market higher since stocks bottomed in early March, although the sector fell sharply Tuesday on concerns the rally has gotten ahead of itself.
According to the IPS report, 10 of the top 20 financial “bailout” firms have reported the details of stock options granted in early 2009. “Based on rising stock prices, the top five executives at these firms have enjoyed a combined increase in the value of their stock options of nearly $90 million,” it said.
The study may well arouse more public anger over lavish executive bonuses at top financial firms that many blame for helping inflate the credit bubble.
The 20 U.S. financial companies that have received the most government assistance paid their top five executive officers total packages worth a combined $3.2 billion in the three years through 2008, the IPS said.
The report also took aim at the practice of granting lucrative stock options to top executives. For them, big market declines like those suffered in 2008 “quickly translate into opportunities, mainly because corporate boards so often react to such declines by handing executives new batches of stock options, all exercisable down the road at the current low share price,” the IPS said.
“To make future windfalls even more certain, boards of directors also routinely increase the number of shares their executives can option whenever hard times hit,” it added. “With more shares in play, even a tiny rebound in share price can translate into a handsome reward.”
(c) 2009, MarketWatch.com Inc. Source: McClatchy-Tribune Information Services.