by Eileen Swee Lian Goh

Created on: January 05, 2009

Richard Fuld, the former Chief Executive Officer of Lehman Brothers, told a Congressional hearing that he received some USD 250 million between 2000 and 2007. This works out to about USD 31.25 million a year.

During the same period, across the Pacific in East Asia, almost 10000 investors sank over SGD500 million (approximately USD 350 million) into Lehman Brothers-related structured products such as the Development Bank of Singapore's High Notes 5 series and Minibonds. Some of these investors were retirees who bought the structured products with their life savings. When Lehman Brothers filed for bankcruptcy protection in September 2008, those who had invested in the DBS High Notes 5 series were not able to recover their capital. The Minibond investors have been told that they would be receiving about 10 % of their initial capital investment.

American Insurance Group's former Chief Executive Officer, Martin Sullivan, received USD 47 million as severance payment in July 2008. This payout has been linked by finance industry experts to AIG's current financial difficulties, for which the insurance company sought a US government bailout package.

Capital from the United States government's bailout scheme for the country's troubled finance industry comes from taxpayers' money. It is the responsibility of the US government to see to it that this money is invested correctly.

In addition, Corporate America has become a global entity - financial events on Wall Street have significant repercussions worldwide. The collapse of a US investment bank, if due, in part, to bad management, reflects poorly on the country's financial regulators. Such is the case with Lehman Brothers. Confidence in all US financial institutions drops not only among American citizens but also among the United States' trading partners abroad.

For these reasons, I am of the opinion that the US government's bailout for the finance industry should include some restrictions on executive pay, especially as it has been shown that an executive's unjustified high payout can contribute to his or her company's financial problems, as in the case of AIG.

Corporate entities are not obliged to accept the US government bailout terms - they are free to seek other sources of cash injections. If a company wishes the US government to finance its losses, then it should also accept the government's terms and conditions. And, the government has to bear in mind its responsibility to taxpayers.

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