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Reports about big bonuses for Wall Street executives have struck a nerve with people who wonder how the executives can justify large payments when their firms are in shaky condition or are seeking federal help.
It's drawn the ire of President Obama, who called it "the height of irresponsibility. It's shameful." On Feb. 4, 2009, he said top executives at firms receiving federal aid will have their compensation capped at $500,000 and that bonuses would have to come as stock that they can't receive until the government is reimbursed.
The New York State Comptroller reported in late January that Wall Street firms in 2008 handed out $18.4 billion in cash bonuses to employees who live in New York City, the sixth-largest amount on record. Critics have said the employees don't deserve the rewards because the firms lost more than $35 billion in 2008 and the federal government is spending hundreds of billions of dollars bailing out many of them.
Fred Smith, chief executive of FedEx and supporter of George W. Bush, John McCain and other Republicans, tried to cool down the heated discussion with a bit of perspective on ABC's This Week on Feb. 1, 2009.
Host George Stephanopoulos noted that Smith "actually took a pay cut in December. You announced a 20 percent pay cut because of the performance of FedEx over the last year, because of the tough economic times. And I wonder ... what do you think of the bonus structure now on Wall Street?"
Smith replied that compensation on Wall Street is built on bonuses "much more so than in the industrial sector. As I understand it, the average bonus in that $18 billion is about $100,000 a year. The bonuses on Wall Street are down about 44 percent."
Smith was not far off when it came to the average cash bonus. It was $112,000 in 2008, according to New York State Comptroller Thomas DiNapoli's Jan. 28, 2009, report.
And indeed bonuses were down 44 percent in a sense: The total amount given out in bonuses, $18.4 billion, was a decline of 44 percent from the $32.9 billion handed out in 2007.
But due to job losses on Wall Street, there were fewer employees to split the pie in 2008. So the average bonus was down a slightly more modest 37 percent from the previous year's average.
Also, it might have been worth pointing out that while bonuses were well below the 2007 level, that average of $112,000 was still the fifth-highest since the comptroller's office started keeping records in 1985. And the total haul of $18.4 billion was the sixth highest on record. Both were around the same as 2004, a vastly better year for the securities industry and its investors.
And although it's true that bonuses generally make up a substantial portion of the compensation on Wall Street, $112,000 is still more than twice the average salary in the United States.
But Smith is free to use statistics selectively — and the statistics he chose were off by just $12,000 and a few percentage points. We find his statement Mostly True.
This Week with George Stephanopoulos , Feb. 1, 2009
New York State Comptroller's Office, DiNapoli: Wall Street Bonuses Fell 44% in 2008 , Jan. 28, 2009
The NewHour, Backlash Continues Over Billions Paid in Wall Street Bonuses in 2008 , Jan. 30, 2009
MarketWatch, Obama to limit bailed-out bank CEO pay to $500,000, Feb. 4, 2009
New York Times, What Red Ink? Wall Street Paid Hefty Bonuses , Jan. 28, 2009
New York Times, Few Ways to Recover Bonuses to Bankers , Jan. 30, 2009
Washington Post, Admiration Turns to Anger as Wall Street Bosses Feather Nests , Jan. 31, 2009
White House, Remarks by the president on executive compensation , Feb. 4, 2009
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