January 28- Update:
Maureen Dowd Agrees with me:
“If you don’t pay your best people, you will destroy your franchise” and they’ll go elsewhere, he said.
Hello? They destroyed the franchise. Let’s call their bluff. Let’s see what a great job market it is for the geniuses of capitalism who lost $15 billion in three months and helped usher in socialism.”
My father in law sent me this article from two weeks ago int the NY Times.
Dealbook – Putting a Value on a C.E.O. – NYTimes.com
“By itself, more share and retention-based compensation is not the magic bullet, because it certainly didn’t stop us from running up very large losses,” Mr. Bischoff said.
This ranks up there with all time statements lacking any humility or self-awareness. If you look at the explosion in financial sector profitability (much of it inflated) and bonuses and other stock-based payments, and then at the continued pay out of bonuses even as the financial sector sank, then the premise of this statement by the Chairman of Citigroup, which is that more of the same compensation schemes _may_, (may!) not help avoid large losses is weirdly up-is-down through-the-looking-glass logic that can only make sense to the world of Wall Street and high finance. If you are the CEO, of, say, I don’t know, a car manufacturer, and your firm looses more than half of its value in one year, than you d not get a bonus. You probably lose your job.
The article goes on to repeat the logic of more of these compensation ideologues several times that if firms do not continue to pay out huge bonuses tied to stock options, than they will lose the top management talent they need to compete. ha ha, ho ho! I am drying my eyes.
Let’s list some accomplishments of this great management talent (all are sarcastic, BTW)
Because they have done such a great job so far.
Because they did not create the conditions for this financial mess by advocating deregulation and obfuscation of financial systems under the guise of free market theory.
Because they designed and staunchly defend as in the general interest stock option compensation that creates clear and perverse incentives to smooth earnings, game financial accounting, and other malfeasance (whether deliberate or convenient).
Because they have not hijacked the very governance mechanisms meant to curb the abuses of greed in a free market- corporate boards and regulatory agencies.
Finally, is there a labor economist in the house?
The argument is that if not, as a group, paid super premiums over all other types of organizational leaders, from medicine, higher education, the frickin’ president, manufacturing, and every other sector of American economic activity, then oh no! there will be a mass exodus of CEO and top management. Really? And where in the hell where they go work? Boeing? Chrysler? Schering Plough? Best Buy? Given the vast pool of educated and experienced mangers and even financial managers in the world, you don’t think we could possibly find people willing to work for $2,$4,$6 million in total compensation? Especially if that is twice what they ear now (or more) and not any better than what they could get elsewhere.
The notion somehow massive bonuses and total compensation are the only way to keep people performing as the CEOs and top leaders of banks, brokerages, investment banks, and so on just seems laughable.