Banker vs. Ballers - Dick Bove's Analysis

Friday, September 18, 2009

Financial

Execs

Underpaid?

1

A

Limited

Survey

Richard X. Bove

Vice President Equity ResearchFinancial Sectorrbove@rochdalesecurities.com813.909.1111

Methodology

and

Results

Using

data

derived

from

USA

Today

and

Sports

Illustrated

an

attempt

was

made

to

compare

total

compensation

in

three

broad

sectors.

The

2007

total

compensation

of

CEOs

in

the

financial

and

non

‐

financial

industries

were

compared

to

the

2008

total

compensation

in

sports.

The

2007

numbers

were

used

for

the

executives

since

it

is

believed

that

this

represented

their

top

incomes.

The

top

15

in

total

compensation

were

selected

in

each

category.

They

were

then

placed

in

a

matrix

(see

table

on

The

results

showed:



The

average

total

compensation

of

the

top

15

sports

figures

was

$40

million

per

year

(median

$31

million).

The

top

non

‐

financial

executives

received

$39

million

on

average

(median

$30

million)

and

the

top

15

financial

executives

received

an

average

of

$30

million

(median

$21

million).



The

following

were

noted

concerning

the

45

individuals

listed:

o

In

the

top

15,

there

were

6

sports

figures,

5

non

‐

financial

execs,

and

4

financial

executives.

o

In

the

middle

15,

there

were

5

sports

figures,

9

non

‐

financial

executives,

and

1

financial

executive.

o

In

the

bottom

15,

there

were

4

sports

figures,

1

non

‐

financial

executive,

and

10

financial

executives.



The

two

highest

paid

investment

bankers

will

no

longer

be

employed

as

CEOs

on

January

1,

2010.



The

traditional

banker

with

the

highest

pay

received

$29

million.

He

was

the

only

traditional

banker

to

earn

as

much

as

any

of

the

top

15

sports

players.



There

was

not

one

woman

listed

in

any

category.

Not

shown

is

that

the

average

basketball

player

in

the

NBA

makes

$5

million

per

year

and

the

average

baseball

player

in

MLB

makes

$3

million.

The

average

employee

at

Goldman

Sachs

(GS/$180.91/Buy)

is

estimated

to

make

$800,000

this

year.

One

might

argue

that

sports

leagues

are

government

sponsored

oligopolies.

As

a

result

of

restraining

trade

in

this

fashion,

government

allows

sports

figures

to

earn

incomes

at

the

peak

of

American

industry.

One

might

also

argue

that

by

establishing

trade

restraints

in

this

sector,

government

believes

that

entertainment

should

be

valued

more

highly

than

the

financial

and

productive

sectors

of

the

economy

where

restraint

of

trade

is

illegal.

This

information

is

being

provided

because

government

is

apparently

now

seeking

to

place

income

restraints

on

the

financial

sector,

presumably,

because

it

believes

that

allocating

funds

to

this

sector

is

not

as

productive

for

the

economy

as

say

being

a

shooting

guard

for

the

Los

Angeles

Lakers,

or

a

third

baseman

for

the

New

York

Yankees.

Nations

like

China

that

compete

with

the

United

States

globally

do

not

seem

to

have

the

same

incentives

built

into

their

systems.

That

country

appears

to

be

placing

the

greatest

incentives

on

producing

low

priced

products

that

can

be

sold

globally.

Friday, September 18, 2009

Financial

Execs

Underpaid?

2

CompCompCompMillionsFinancial2007All Other2007Sports2008

$130 - $120Tiger Woods$128$120 - $110$110 - $100$100 - $90$90 - $80John Thain$83$80 - $70$70 - $60Les Moonves$68Richard Adkerson$65Phil Mickelson$62Lawrence Ellison$61$60 -$50Bob Simpson$57Lloyd Blankfein$54$50 - $40Kenneth Chenault$50John Mack$41LeBron James$40Floyd Mayweather$40$40 - $30Glenn Murphy$39Kobe Bryant$35Shaquille O'Neal$35Alex Rodriquez$35Edward Breen$34Ray Irani$34Kevin Garnett

$31

Ronald Sargent

$30

Peyton Manning$30Derek Jeter$30$30 - $20Jamie Dimon$29Lee Scott$29Miles White$29Richard Meelia$28Daniel Hesse$28Robert Iger$28Alan Lafley$27Dale Earnhardt$27James Hackett$27Allen Iverson$27Kevin Durant$26Jeff Gordan$26Ben Roethlisberger$25James Cracchiolo$23Richard Fuld$22Robert Kelly

$21