by Tanta on 3/07/2008 05:51:00 AM

From the Seattle Times:

WaMu has revised its bonus plan for nearly 3,000 top executives so continuing damage from the subprime-lending collapse won't crimp their annual awards.

The struggling Seattle-based lender said in a regulatory filing Monday it will exclude the cost of soured real-estate loans and foreclosure expenses when it calculates net operating profit, the biggest component of executives' 2008 bonuses.

Other changes to the bonus plan also appear to reduce the impact of troubled parts of its business, while giving a bigger role to factors that are less problematic.

The 2008 bonuses will be based on these criteria:

• Net operating profit, 30 percent — with loan losses and expenses related to foreclosed real estate excluded.

• Noninterest expense, 25 percent — again, excluding expenses related to business restructuring and foreclosed real estate.

• Fees from retail banking — a new factor, weighted at 25 percent. Many banks including WaMu have been increasing fees for services such as ATM withdrawals by noncustomers to compensate for losses in other areas.

• Customer-loyalty performance, 20 percent — an increase from 10 percent in the 2007 bonus plan.

In a prepared statement, WaMu said, "The success with which credit costs are managed will unequivocally continue to be a major part of the board's final deliberations."

Spokeswoman Libby Hutchinson said the bonus plan covers almost 3,000 people in WaMu management, many of whom are not directly involved in lending.

But Fred Whittlesey, a Bainbridge Island compensation consultant, questioned why awards for Killinger and the three other top executives named in the plan aren't tied directly to earnings.

"If (they) are not responsible for bank profitability, who is? There's no reason they should be insulated from expenses they created," he said.

The bank has said bonuses, long-term stock awards and other parts of its compensation plan are important to retaining executives.

In January, WaMu said Killinger would receive 3.2 million stock options to vest in coming years, providing him "a strong incentive to restore shareholder value."

But Cannon said WaMu's highest executives shouldn't require such incentives.

"We are somewhat surprised that top management needs extra compensation in order to be retained," he wrote.

I personally would offer these guys $500 cash for their keys. But I have been known to take a hard line with speculators. As, of course, has our Mr. Paulson. Paging Mr. Paulson!