The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Wed, 22 Jul 2026 19:20:14 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png Cashing in Before the Music Stopped – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 Cashing in Before the Music Stopped https://corpgov.law.harvard.edu/2009/12/07/cashing-in-before-the-music-stopped/?utm_source=rss&utm_medium=rss&utm_campaign=cashing-in-before-the-music-stopped https://corpgov.law.harvard.edu/2009/12/07/cashing-in-before-the-music-stopped/#comments Mon, 07 Dec 2009 15:07:30 +0000 http://blogs.law.harvard.edu/corpgov/?p=5845?d=20091207100730EST
Editor’s Note: This post is based on an op-ed article from the print edition of today’s Financial Times by Lucian Bebchuk, Alma Cohen, and Holger Spamann. The op-ed article is based on their study, “The Wages of Failure: Executive pay at Bear Stearns and Lehman 2000-2008,” which is available here. Although Lucian Bebchuk is a consultant to the US Treasury’s office of the special master for TARP executive compensation, the views expressed in the post should not be attributed to that office.

According to the standard narrative, the meltdown of Bear Stearns and Lehman Brothers largely wiped out the wealth of their top executives. Many – in the media, academia and the financial sector – have used this account to dismiss the view that pay structures caused excessive risk-taking and that reforming such structures is important. That standard narrative, however, turns out to be incorrect.

It is true that the top executives at both banks suffered significant losses on shares they held when their companies collapsed. But our analysis, using data from Securities and Exchange Commission filings, shows the banks’ top five executives had cashed out such large amounts since the beginning of this decade that, even after the losses, their net pay-offs during this period were substantially positive.

In 2000-07, the top five executives at Bear and Lehman pocketed cash bonuses exceeding $300m and $150m respectively (adjusted to 2009 dollars). Although the financial results on which bonus payments were based were sharply reversed in 2008, pay arrangements allowed executives to keep past bonuses.

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