Study: CEOs cashed in before Wall Street meltdown
The CEOs of Bear Stearns and Lehman Brothers, the two investment banks that collapsed during last year’s financial meltdown, walked away with hundreds of millions of dollars in compensation even as the company’s shareholders lost everything, says a new report from Harvard Law School.
The top five executives at Bear Stearns made a total of $1.4 billion from bonuses and equity sales between 2000 and 2008, while the top five executives at Lehman Brothers made around $1 billion during that same period — the period during which the companies ran up the bad investments that would see them collapse in 2008, according to “The Wages of Failure” (PDF), a report from Harvard Law School’s Program on Corporate Governance.
“The people who invested in these companies should feel betrayed,” Nell Minow, a compensation expert at the Corporate Library, told NBC’s Lisa Myers. “The whole idea of capitalism is that the people provide the capital and the executives take care of it for us. In this case, the people provided the capital, and the executives took it.”
Bear Stearns CEO James Cayne personally made $388 million in the eight-year period leading up to the bank’s collapse, while Lehman Brothers CEO Richard Fuld made $541 million. Boomberg news service notes that “shareholders who held their shares throughout the period analyzed in the report lost most of their initial investment.”
NBC’s Myers points out that both Cayne and Fuld are being sued by shareholders.
CNBC business anchor Jim Cramer told NBC’s Matt Lauer that the corporate culture that led to the huge bonuses and financial collapse isn’t going away.
“What happened to these people? Nothing,” Cramer said. “They got the money, they left. … They got away with it, so why shouldn’t the next guy try?”
This video is from NBC’s Today Show, broadcast Nov. 24, 2009.