Banker Vs. Ballers - Dick Bove's Analysis

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Friday, September 18, 2009

Financial Execs Underpaid?  Richard X. Bove

A Limited Survey 

 

Vice President Equity Research Financial Sector [email protected] 813.909.1111

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 next page).  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.       

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Friday, September 18, 2009

Financial Execs Underpaid?    Total Compenation for the Top 15 Individuals in Three Sectors Comp Millions

Financial

2007

Comp All Other

2007

Comp Sports

$130 - $120

Tiger Woods

2008 $128

$120 - $110 $110 - $100 $100 - $90 $90 - $80

John Thain

$83

$80 - $70 $70 - $60

Les Moonves

$68

Richard Adkerson

$65

Lawrence Ellison

$61

Bob Simpson

$57

Phil Mickelson $60 -$50 Lloyd Blankfein $50 - $40

$54

Kenneth Chenault

$50

John Mack

$41

$40 - $30

Glenn Murphy

LeBron James

$40

Floyd Mayweather

$40

Kobe Bryant

$35

$39 Shaquille O'Neal

$35

Alex Rodriquez

$35

Edward Breen

$34

Ray Irani

$34

Ronald Sargent

$30 Peyton Manning

$30

Derek Jeter

$30

Kevin Garnett

$30 - $20

Jamie Dimon

$29 Lee Scott Miles White

James Cracchiolo

$20 - $10

$62

$31

$29 $29

Richard Meelia

$28

Daniel Hesse

$28

Robert Iger

$28

Alan Lafley

$27 Dale Earnhardt

James Hackett

$27 Allen Iverson

$27

Kevin Durant

$26

Jeff Gordan

$26

Ben Roethlisberger

$25

$27

$23

Richard Fuld

$22

Robert Kelly

$21

Kenneth Lewis

$20

Jay Fishman

$19

Arthur Ryan

$18

Dowd Ritter

$17

Ronald Logue

$17

Richard Fairbank

$17

Dennis Glass

$16

$10 - $0 Average

$30

$39

$40

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Friday, September 18, 2009

Financial Execs Underpaid?   

 

 

 

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Friday, September 18, 2009

Financial Execs Underpaid?   

ROCHDALE SECURITIES - DISCLOSURE INFORMATION Rochdale Securities LLC ("Rochdale") is an institutional brokerage firm that does not make a market in equity securities and does not engage in investment banking. Rochdale and its affiliates, including its principals, may own securities of the companies which are subject of this report but do not own 1% or more of any class of common equity securities of any subject company. The information and opinions presented in this report are provided for informational purposes only and are not to be used or considered as an offer or solicitation of an offer to buy or sell securities or other financial instruments. Rochdale has not taken any steps to ensure that the securities referred to in this report are suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about any such investment. Information and opinions presented in this report have been obtained or derived from sources believed by Rochdale to be reliable, but Rochdale makes no representation as to their accuracy, timeliness, or completeness. Rochdale accepts no liability for loss arising from the use of the information presented in this report. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information and opinions contained in this report reflect a judgment at its original date of publication by Rochdale and are subject to change without notice. Rochdale may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views, and analytical methods of the analysts who prepared them and Rochdale is under no obligation to insure that such other reports are brought to the attention of any recipient of this report. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Rochdale to any registration or licensing requirement within such jurisdiction. All material presented in this report is the property of Rochdale and is under copyright to Rochdale. This report may not be reproduced, distributed, or published by any person for any purpose without the prior express written consent of Rochdale. RR RATINGS DISTRIBUTION BUY 23 HOLD 48 SELL 29 RATINGS FOR STOCKS Buy Company has demonstrated that it is a value creating concern; the return on capital (as adjusted) exceeds its cost of capital. Stock is currently trading in a range that does not exceed its intrinsic value. Stock is expected to out-perform the market over the next twelve months. Hold/Neutral Company either is not creating value (i.e., its costs exceeds its return on capital) or it is trading at a price equal to or in excess of its intrinsic value. Expectation is at best stock will perform in-line with market. If not currently held, the stock should be avoided. Sell Company's cost of capital exceeds its return on capital; and the company has no intrinsic value or is trading at a significant premium to its intrinsic value. Expect stock to under-perform the market over next twelve months. 

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