Backlash Over Executive Compensation: Goldman, UBS Forgo Bonuses

Executives are known for their lavish compensation. As you know, even when they are fired or resign in disgrace, they still get large, multi-million dollar golden parachutes. So it is interesting that this year some executives are choosing to forgo bonuses. Already, Goldman Sachs (GS) and UBS (UBS) have announced that there will be no bonuses for top execs. And Citi (C) is considering getting rid of executive bonuses for this year as well (but apparently it was much easier to make the decision to slash more than 70,000 jobs in last couple of months).

What do companies hope to gain by slashing executive compensation?

This is an interesting question. For the most part, the answer is goodwill. Main Street is up in arms over the rather high compensation enjoyed by executives on Wall Street. After all, people that made awful business decisions continue to be rewarded, while everyone else suffers. And there is a great deal of outrage over continued perks for AIG execs who have received a generous bailout package, courtesy of the taxpayers.

Perhaps the companies that willingness to give up some of their perks and bonuses will show that they plan to change the way things have been done on Wall Street -- or at least give the impression that they are willing to "sacrifice" as well. And maybe it's a way of nudging Congress away from meddling with executive compensation as part of rescue legislation. At any rate, it is clear that these companies expect something from this move.

It does seem to be working for GS (an admittedly solid company anyway), so maybe C ought hop on board. Before the outrage over jacked up credit card interest rates and job layoffs really causes problems.

Disclaimer: I am not an investment professional. This should not be construed as investment advice. All investment carries the risk of loss. Before investing, do your own research and/or consult with an investment professional.