Pressure Grows To Cut Or Forgo Firms Bonuses
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And New York State Attorney General Andrew Cuomo has (also as expected) joined on the populist bandwagon, urging Citigroup and other firms to 'do the right thing' on bonuses. His office said in a statement Monday:
'Citigroup's announcement today that it will cut an additional 50,000 jobs is a sad and disturbing development for the company. As Citigroup suffers, so too do investors, employees, and taxpayers. At the very least, Citigroup should follow Goldman Sachs' lead and announce quickly that top executives will not be receiving bonuses this year. Citigroup's stated intention to wait until the new year to make its bonus decisions is a mistake. After four consecutive quarterly losses, it seems only fair that top executives should shoulder their fair share of these difficult economic times. It would send exactly the wrong message for Citigroup's top brass to collect bonuses while investors, taxpayers, and now Citigroup's own employees suffer.
Citigroup is, of course, not the only company in this situation. Other companies like AIG, who have received billions in rescue financing from taxpayers, also need to take a hard look in the mirror when determining the right thing to do on executive bonuses during these very difficult economic times'.
The focus is particularly on Citigroup, which for some reason has said that it will not make a decision on executive bonuses until next year. The company is in a parlous state, confirming Monday that it will cut an additional 50,000 staff. Critics points out that with a stock price also at a 13-year low, executive bonuses for 2008 are out of the question.
Morgan Stanley has confirmed, however, that it is looking into the matter of executive bonuses for this year, and will make an announcement in 2 weeks. CEO John Mack waived his bonus entitlement last year.
And it's not just US firms that are feeling the heat on executive bonuses. UBS came out Monday and confirmed that senior executives will receive no bonuses for this year, and that as part of a bonus plan starting in 2009, management cash and stock bonuses will be paid out over a period of 3 years. There will also be 'clawbacks' to account for subsequent poor performance. Barclays also came out Tuesday to confirm that its executives directors have waived their rights to bonuses this year.
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