WASHINGTON. - Critics of executive pay have more reason to be angry.
A new study has found that executives at two firms - Lehman Brothers and Bear Stearns - walked away with huge payouts even as their shareholders were losing almost everything.
It happened during the early phase of the financial meltdown last year when Bear Stearns was sold to JP Morgan to avoid collapse and Lehman Brothers went bankrupt. In both instances, shareholders lost billions of dollars and thousands of employees lost jobs.
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| Richard Fuld, Chairman and Chief Executive Officer of Lehman Brothers Holdings Inc |
In the new study, 'Wages of Failure,' experts at Harvard Law School found that top executives of the two companies came out just fine.
Since 2000, the top five executives at each firm have received staggering amounts of cash bonuses and have sold mountains of stock. Bear Stearns executives cashed out about $1.4 billion and Lehman execs were not far behind at $1 billion.
"People who invested in these companies should feel betrayed. The whole idea of capitalism is that the people provide the capital and the executives take care of it for us," said Nell Minow, a compensation expert with The Corporate Library. "In this case the people provided their capital and the executives took it."
Experts found that when the firms collapsed, both Bear Stearns CEO James Cayne and Lehman CEO Richard Fuld lost about $900 million worth of stock, but the study said they still came out well ahead overall. Cayne walked away with $388 million and Fuld walked with even more - $541 million.
Last year, Cayne bought two condominiums at the iconic Plaza Hotel in New York City at a price tag of $28 million.
Fuld also remains a wealthy man. He has an $8 million estate in Greenwich, Connecticut and he sold his Park Avenue apartment in New York for $26 million over the summer. He also has a $14 million oceanfront estate in Florida which he sold to his wife for $100 earlier this year.
Shareholders are suing executives of both firms.
Gerald Silk represents former Lehman shareholders, who claim executives weren't truthful about the firm's financial condition.
"Lehman crashed and shareholders lost billions of dollars when Dick Fuld and others walked away personally very, very wealthy," said Silk.
