Top Executives at Bruised Firms Among Wall Street's Highest Paid

Senators Christopher Dodd, left, and Richard Shelby chat at a hearing yesterday. Dodd wants to limit executive compensation at firms that participate in the federal bailout. (By Nikki Kahn -- The Washington Post)
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Limits on executive pay run counter to a long-standing Wall Street practice of granting annual bonuses based on profit growth.

"It goes against the grain of the culture of the industry where people expect to work hard and take risks and get rewarded through pay for that hard work," said Alexander Cwirko-Godycki, research manager for executive compensation research firm Equilar.

Indeed, Goldman Sachs said in a filing with the Securities and Exchange Commission that its compensation awards reflected the firm's very strong financial performance "relative to our core competitor group in terms of year-over-year growth in net revenues, net earnings and earnings per share. Based on final 2007 results, we had the highest growth in the group for each of these measures."

At J.P. Morgan Chase, the compensation committee said in a spring SEC filing that it paid Dimon $30 million because the company's performance was strong relative to other competitors. They said he "continues to skillfully lead the Firm through a very challenging financial and credit environment."

Wachovia justified Thompson's compensation for the year because "earnings per share growth and Wachovia's tangible return on equity have been at or above the median of its peer group for 2007," according to an SEC filing. The firm noted, however, that Thompson did not get cash or stock bonuses because, "Wachovia did not achieve its threshold performance goals."

Thompson was ousted in June amid billions of dollars in losses on mortgage-related investments. He was replaced by former Treasury undersecretary Robert K. Steel, who will receive an salary of $1.1 million and a $6 million bonus, as well as additional incentive pay worth up to $15 million, according to an SEC filing.

Restricting the way banks can compensate their leaders could hinder the sector's recovery, some argue. It can make it harder to attract top talent, especially during a crisis.

"When the tough gets going, you don't want to bring in your B team. You want your A team," said Brian Foley, who runs a compensation consultancy in White Plains, NY.