The guy would have taken the CEO job without the bonus; it serves zero purpose to the shareholders to give him $7.5 million.

Why don't companies base executive compensation on performance? Doesn't that seem logical?

My suspicion is that this is why some companies start out as good and are later perceived as evil. The game changes once you have legal fiduciary responsibilities to shareholders. It seems to me that it can get very hard to defend your strategy of not maximizing profits when others around you are raking it in.

Put the money in a 5 years escrowed account. If the changes that you made were sound and the company continues to succeed, you get it. Otherwise, you forfeit.

Your situation is bad exactly because you are not paying attention to this how to build an empire (China) vs. collapse one (USA).

Beyond that the board wants to reassure themselves that they are making good decisions, consequently they can justify a slightly larger payday for the new CEO on the grounds that since they are such fine people they have hired an above average CEO and should pay him slightly more than the median compensation for Executives in comparable companies...

Acting like Fishman was appointed CEO just because he was a friend of the board is completely false.

He was preivously the CEO of two other banks: Sovereign Bank and Independence Community Bank. He has 25+ years experience as a senior executive in banking.

I'm curious why you are so offended by a general viewpointon executive compensation.

It would work out nicely if every leader thought leading was so fun that he'd do it for free. Berkshire Hathaway chooses its managers in this way. The people they hire seem to enjoy building something rugged.

Unfortunately, many leadership positions just aren't fun enough for this to be a viable option. And it's not even just a question of choosing the right man for the job. Public companies are notorious for their ruthless owners (the market), which often require different things than what would be necessary for long-term growth and stability. Even if all shareholders were interested in the distant future, the market is nothing if not a committtee. Necessary decisions are sometimes unpopular. No one who masters his craft (in this case domain-specific leadership) wants to be bogged down with politics, but this is exactly what public companies offer.

Hence, these positions attract the wrong type of people - those who are attracted to money or power. The 'right man for the job' is probably enjoying a tenth of the salary leading some small company somewhere, because leading a large market-exposed company just isn't worth it. It's not just a question of choosing the right guy and writing him a big check; he might not want the job.

Must remember </sarcasm> tag

A board of directors in a state of panic. Note that Mr Fishman was serving as Chairman at the third largest mortgage brokerage in the country (who do commercial, industrial and multi-unit residential deals - not sub-prime stuff) - not the type of job to leave for a company about to go under without big incentives.

It's certainly possible Fishman will decline to take some or all of the compensation, like one of the other failed institution's CEO (can't remember which now)

It's hard -- probably impossible -- to justify Wall Street compensation packages on supply-and-demand grounds. In the 70s, CEOs earned about 30 times the earnings of their workers. By 2007, they earned 344 times the average pay of their workers.

CEOs do not provide 10 times the value they produced in the 70s. They are not 10 times more scarce. Corporations are not 10 times more profitable. They are not 10 times more prosperous by any measure -- if they were, they would offer 10 times more compensation, on average, to everyone at their company.

So if I were still a Republican, I'd probably say something like this: banks like Bear Stearns were irrational, and they should pay the consequences. The fewer bad banks we have, the better it is for all of us in the long run.

I don't know how many Republicans would agree with that last bit. Truth be told, most of them aren't even pro-free-trade. They're just anti-socialist. Anything that sounds like socialism sends them running for the hills. "Supply and demand" are useful to them only as a cudgel with which to attack the socialist view.

And this sort of justification is trumpeted only by the educated, Wall-Street-Journal-reading elite of the Republican party. Their popular support base in rural areas couldn't care less about economic issues.

Look at who gets the money from Wall Street. Why? Big biz loves regulation that it can control. (When buying and selling is regulated, regulators are the first thing that will be bought and sold.)

FWIW, Sen Clinton does very well but Sen Obama is clearly at the top of the class. In three years, he got more from Fannie and Freddie than Clinton did in 8 and almost as much as Kerry did in 20. The highest 20 year total is Dodd, but Obama would have passed him by the end of his full term as Senator.

Meanwhile, Barney Frank is still out there arguing that we should be giving mortages to folks who can't pay them.

Never confuse publicity with policy.

I think there is an argument to be made for better, more transparent corporate governance rules, that would make it easier for the shareholders to say "uh, no" to stuff like this, but it's ultimately their money.

(BTW, I am not a Republican).

The talk about short term profit taking being driven by the market is BS as well. If a company were to take actions that would depress its earning in the short term for the sake of (demonstrable) long term growth and profits, the smart segment of the market would recognize that and respond favorably.

One partial solution: outlaw stock options in publicly traded companies. Use cash bonuses and have the usual Employee Stock Purchase Plan that provides a 15% discount on investing in the company.

Shareholders could choose to buy stock based on how the CEO is paid but few do.