Even as American International Group is under intense fire for the $165 million it paid in bonuses, Fannie Mae fnm and Freddie Mac fre have revealed they also are giving top executives retention bonuses.
The two mortgage giants have been taken over by the government and posted $108 billion in losses last year stemming from mortgage defaults.
In securities filings, Freddie said it will pay a retention award of $1.5 million to Executive Vice President Michael Perlman by March 2010. Perlman, whose base salary is $500,000, already collected $300,000 of his bonus. Interim CFO David Kellermann will get an $850,000 bonus, and Senior Vice President Michael May will get $700,000.
"It is insulting to the average everyday worker who's lost a job and is collecting unemployment to see these kinds of payments," says David DeBoskey, assistant professor at Charles W. Lamden School of Accountancy. DeBoskey says the payments are meant to prevent executives from abandoning a company, but because similar jobs are tough to find now, retention bonuses are hard to justify.
Meanwhile, Fannie Mae will pay a total of $871,000 to Michael Williams, its chief operating officer, whose base annual salary is $676,000. Three other executives will get bonuses ranging from $670,000 to $737,000.
Big bonuses also are coming to light at other companies that received some form of federal help. Wells Fargo, which bought the almost-failed Wachovia, will pay a bonus of $8 million to Senior Vice President David Carroll. Carroll, a former Wachovia executive, will get that on top of salary and incentives totaling $20.7 million.
And on Tuesday, Sen. Robert Menendez, D-N.J., sent a letter to Treasury Secretary Timothy Geithner, urging him to stop Morgan Stanley from paying $3 billion in retention bonuses to its brokers as it merges its brokerage business with Citigroup.
Wednesday, a New York Supreme Court judge ruled that state Attorney General Andrew Cuomo could reveal the names of the top 200 executives who received 2008 bonuses at Merrill Lynch. Merrill and parent Bank of America had been fighting to keep the names confidential. Rep. Barney Frank, D-Mass., also has asked AIG to provide the names of all recipients of its bonuses.
"The political forces behind these demands suggest that they want to embarrass these executives into giving up their bonuses," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.