(The following post originally appeared on ONSecurities, a top Minnesota legal blog founded by Martin Rosenbaum to address securities, governance and compensation issues facing public companies.)
Just as lawmakers and regulators are preparing to consider compensation reform once again, a new report has surfaced that's likely to turn up the heat on the debate. The Wall Street Journal reported that the major financial institutions are on pace to pay their employees around $140 billion this year - a record level. The Journal's study is based on compensation amounts these firms have accrued to date this year. Therefore, the amounts might be inflated. However, it's clear that the amounts will be back to pre-crash levels.
For example, the Journal projects that Goldman Sachs will pay $20 billion in compensation and benefits ($743,000 per employee) this year. Of course, Goldman is having a great year so far. But, as reported in the New York Times DealBlog, there is still a lot of debate over how much Goldman's results were helped by the government's bailout of AIG, which resulted in significant payouts to Goldman on AIG-insured contracts.
As reported by the Journal, its findings come at a time when the Obama administration's pay czar is preparing to issue his findings on pay packages at many of the financial firms that received TARP money. More generally, Congress will be considering reforms such as Say-on-Pay for all publicly held companies. One way or another, numbers like we're seeing from Wall Street are sure to affect the debate.
Change (to the Cheat Sheet) You Can Believe In
It's been easy to keep the ON Securities Cheat Sheet up-to-date since early August - nothing really changed. All of the various legislative and regulatory reforms were dormant for a couple of months. (Probably waiting for the Olympic Committee to select a host city for 2016 and the Nobel Committee to select a Peace Prize winner.)
At long last, this month there has been a new development worthy of changing the Cheat Sheet. As reported in Bloomberg and elsewhere, the SEC has decided not to take any action on the proposed shareholder access rules this year, as it evaluates the many public comments on the proposal. The Cheat Sheet has been updated to reflect this decision, and as always, the updated version is available on the Resources section of this Blog.