Wall Street Bonuses (2)

Today, the Wall Street Journal http://www.blogger.com/www.wsj.com reports that the top seven executives of Goldman Sachs will receive no bonuses for 2008. Even though the company's results were better (i.e. less bad) than the rest of Wall Street, shareholders have still been hammered.

Since most of us care about absolute returns, the fact that our money managers "only" lost $40,000 of the $120,000 in our retirement accounts - rather than, say, $60,000 - provides little consolation.

The top three executives, Chief Executive Lloyd Blankenstein as well as co-presidents, Gary Cohn and Jon Winkelried, each took home $67.5 million bonuses for 2007, so this is not a trivial amount of money. Further, since the other major Wall Street players - Morgan Stanley, Lehman Brothers (in Chapter 11), Bear Stearns (bought by J.P. Morgan Chase in the first shotgun marriage of the year) and Merrill Lynch (bought by Bank of America in another shotgun marriage) - did worse, we may hope that a precedent has been set.

That zero bonuses are well deserved is clear. The situation does, however, raise the question of whether Warren Buffet (CEO of Berkshire Hathaway) is behind the curtain pulling strings. If so, it is good that a private investor, with a stellar record of placing shareholder interests above those of management, is calling the shots. (Full disclosure: I own Berkshire Hathaway shares). The far less attractive alternative is that government bureaucrats will be in charge of micro-managing compensation decisions.