First it was Circuit City (CC), then MBIA (MBI) did it and now Washington Mutual (WM) is making sure executives in charge of the $1.87 billion dollar Q4 loss don't feel it in their wallet, unlike shareholders.
Let's refresh: Washington Mutual's shares are down 70% in the past twelve months and have not traded at current levels in 12 years. One would think with the Q4 loss and the year to date share price, execs would be worried about their jobs, not thanking the board for a sweet bonus plan.
Here are the egregious portions:
- 30% of cash bonuses will be based on net operating profit, excluding "loan loss provisions other than related to our credit card business" and "expenses related to foreclosed real estate assets,"
- 25% of cash bonuses will be based on non-interest expense, excluding restructuring costs and "foreclosed real estate assets."
Essentially, 55% of the bonus plans will exclude mortgage and the housing industry.
The Board said in a filing that they approved the measure because of a "challenging business environment and the need to evaluate performance across a wide range of factors."..
What? The very reason the "business environment" is so challenging is because these dimwits loaned hundreds of thousands of dollars to people who had no real ability to pay it back. The "environment" is one that they themselves created. Why are we now crafting a bonus plan to eliminate the performance of that very sector? I am having a hard time understanding why more people are not screaming about this.
Loaning money for mortgages is what they do. This is like McDonalds (MCD) crafting a bonus plan based on net operating profit "excluding the results of food sales". A bonus plan ought to be based on the success (profit) of the business, not a rewards for showing up for work each day.
Disclosure: Long MCD.