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As Bank Rates Fall, Executive Compensation Rises

September 07, 2009

| MoneyRates.com Senior Financial Analyst, CFA

The always-prickly issue of executive compensation popped up again last week, as a report on the subject was released by the Institute for Policy Studies.

Executives at some of the large financial institutions which received billions in taxpayer bailout money were paid in early 2009 with stock options now worth $87 billion, according to the report.

There are two sides to the executive compensation argument -- and no, it's not just the executives' side and everybody else's. Some reasonable people would excuse the compensation program on the basis that 1) in a competitive marketplace for talent, you've got to pay top dollar to find people with the right experience and abilities to lead complex financial institutions, and 2) that stock options were the ideal way to compensate these executives, because they rewarded them for helping to pull those banks back from the brink of failure.

The other side of the argument, of course, is that many of these same executives helped lead those banks to the brink of failure in the first place. Giving those executives stock options priced at the low valuations reached at the height of the crisis and then letting them profit as taxpayer money revived the banks can seem almost like rewarding these executives for their bad decisions.

Politicians and the media love to fan the flames of this particular controversy, but the real question is, how much do you really care what your bank's CEO earns? If your bank can deliver competitive money market rates, savings account rates, CD rates, etc., do you mind if the people running the bank are highly-compensated? As long as your bank is secure and offers good service, do you want to limit how much the boss makes?

Money-Rates.com users are an informed banking audience, so please give us your comments on this issue!

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