Main Street bonuses may again outdo Wall Street

NEW YORK: Wall Street bosses aren't necessarily a shoo-in for the most egregious pay packages of the year. True, many enjoyed compensation boosts that outpaced returns to shareholders this year.

But America's regional banks are giving the big boys of finance a run for their money. New rules giving shareholders a say on executive pay means they may finally have the wherewithal to push for better value for their investment.

Several of the country's midsized banks justify paying a lot simply because their competitors do. Key Corp, Huntington Bancshare and Fifth Third all based in Ohio lavish their CEOs with base salaries before bonuses of $3 million apiece. That's almost as much as John Stumpf gets for running Wells Fargo , which is five times the Ohio Three's combined size.

Meanwhile, bonuses for the top executives at Fifth Third, Key and Southern lender SunTrust have of late been based on low targets for earnings, equity or asset returns or other measures. In 2010, their CEOs only had to beat negative return targets yet ended up with total pay packages of $5 million, $7 million and $10 million, respectively. SunTrust's boss took home almost as much as his predecessor in 2006 when the bank was profitable and far more after factoring in a hefty pension award.

In fact several regional bank bosses are taking home more than they or their predecessors did at the height of the boom, despite much worse financial performance. Wall Street's too-big-to-fail CEOs, at least, are only making a fraction of their peak paychecks.

Improving results this year will make it hard to resist paying regional bank bosses even more despite the fact that many of their institutions are still struggling to earn their cost of capital.

The better option, at least for shareholders, might be to sell out or merge with a rival, taking out duplicative costs. Yet with so many overpaid bosses relatively new to their jobs, few own enough stock to make that much of an incentive.

Thankfully, shareholders are better equipped to assert their interests. For instance, new Securities and Exchange Commission rules oblige companies to give shareholders a say on executive pay. The votes may not be binding, but the fear of investor, if not public, opprobrium may minimize bank boards' willingness to splash out the cash for decidedly mediocre performance.

Copyright Reuters, 2011