The end of the year is an important time for executive at major Wall Street banks and brokerage houses. This week we have seen major names like Bank Of America and Citigroup report multi-billion dollar losses as their loan portfolios continue to see massive defaults. Millions of homeowners are fighting through foreclosure at least partially because these institutions approved them for loans that they really weren’t qualified for. Yet like clockwork, the bonus checks will be written and signed over the next few months for the executives who helped put the financial world into turmoil.

Companies paying the bonuses defend the practice, claiming that if they don’t compensate their talented people, those people will find jobs at firms that will pay them better. The institutions that are profitable also claim that they are simply rewarding the people that helped them to generate such massive profits during the year. Still, there is very little in the business section of the newspaper that is more infuriating to the public than reading about giant Wall Street bonuses. There have been several issues tied to executive compensation this week that are worth exploring.

- Bank Of America: CEO Ken Lewis has been on the hot seat for over a year now and recently announced that he will step down at the end of the year. After announcing yet another quarterly multi-billion dollars loss for the third quarter, Lewis announced that he would not receive any compensation or bonus for 2009. Later it was revealed that President Obama’s Pay Czar, an appointee charged with monitoring executive pay for firms who received TARP money, firmly suggested this solution to Bank Of America and the board agreed. Other banks may add their names to the list of companies not paying bonuses in the coming weeks and months.

- Goldman Sachs: This firm is one of the most respected in the world and they have managed to consistently produce outstanding returns in spite of the lagging economy. However, the public is still expressing alarm when they realize that the company set aside half of their earnings this quarter, over $1.5 billion, for executive bonuses. The average executive at Goldman Sachs will receive more than $700,000 as a bonus this year, typifying the complaints of Wall Street being driven and controlled by greed while the masses are suffering. Shareholders have been rewarded with a stock price that’s up over 300% this year alone, but many don’t like seeing executives similarly rewarded.

- Damage Control: Goldman Sachs realizes that public perception is important but they and other firms are not interested in reducing bonuses if they don’t have to. Many are announcing major charitable donations along with bonuses to show that they are doing some good with their bonus pool. Many banks are also paying more of their bonuses in stock or deferred compensation in hopes of the bonuses looking like something other than massive cash payouts. Banks are now as concerned about their reputations as they are about their balance sheets so you would expect them to continue to work to smooth over the public perception whenever bonuses are announced.

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