DealZone

Office of Executive Compensation, it’s a Public-Private Affair

March 23, 2009

NETHERLANDS/It’s hard to imagine a less free-market initiative than having Washington approve executive compensation packages. But by the same token, the astronomical fees charged by many company chiefs would seem to defy laws of gravity, though not necessarily nature. Top athletes know the score: executive compensation has a relational value that outweighs its nominal one. That is to say, it’s not how much you get paid that’s important; it’s whether your paycheck is bigger than your competitor’s. That’s how Goldman Sachs CEO Lloyd Blankfein can walk away with a $65 million pay check in 2006. This is a nonsensical amount of money – more than could be spent by the family Blankfein over several generations. But for Goldman Sachs shareholders, it represents a trophy.

The Senate is doubtless trying to take a deep breath after the House passed legislation aimed at taxing bonuses of AIG and other recipients of government aid. Over at the White House, details of a plan to go Dutch with private investors on the bill for the years-long rave that ended with Wall Street’s crash last year are due later today. And speaking of Dutch, the Finance Ministry in The Hague said it would tackle bonuses at companies receiving government support. And big Dutch bank ING said it was asking some staff to give back their bonus payments for 2008.

The Netherlands and the United States are in similar ways two of the biggest boosters of commercial capitalism in the history of Western civilization. Clearly, they should be taking the lead in rewriting the theory of financial Darwinism.

Deals of the Day:

* Suncor Energy, Canada’ No.2 oil company, agreed to buy rival Petro-Canada for about C$18.43 billion ($14.86 billion) to expand its oil sand reserves and create the country’s biggest energy group.

* Britain’s BG Group has acquired 70 percent of Australian coal seam gas producer Pure Energy and has extended the offer period in its agreed A$1.03 billion takeover bid for Pure.

* India-focused mining group Vedanta Resources plans to pay $34 million to boost its stake in Madras Aluminium Company Limited to 93 percent from 80 after an offer to minorities shareholders.

* Australian miner Straits Resources will sell part of its coal and salt assets to Thai energy firm PTT PCL in a deal worth about A$500 million ($343 million), a source familiar with the deal said.

* Palestinian Prime Minister Salam Fayyad said that a deal for Kuwait’s Mobile Telecommunications Co to take a major stake in Palestinian operator Palestine Telecommunication Company (PalTel) could be signed in the coming days.

* Abu Dhabi National Energy paid $320 million for a 50 percent stake in Marubeni Corp’s Caribbean power portfolio, which it had agreed to purchase in February, Taqa said.

* Bank Muscat said it had sold about 81 percent of its stake in India’s HDFC Bank and earned about 39 million rials ($101.3 million) in pre-tax profit from the sale.

* Bahrain-based lenders Al Salam Bank and Bahrain Saudi Bank said on Monday that their planned merger, which would create a bank with combined market value of $400 million, is on track.

* Private equity groups Hellman & Friedman, Bain Capital and TPG have shown interest in buying the iShares unit from British bank Barclays, sources familiar with the situation said.

(PHOTO: Queen Beatrix of the Netherlands baptizes tulips named “Spring Garden” during the opening of the 60th edition of the International Keukenhof Flower Show in Lisse March 18, 2009. REUTERS/Robin van Lonkhuijsen/United Photos)

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