Risking Our Best Talent
Wall Street will be facing a talent retention challenge very shortly unless the bonus issue is elegantly handled this year.
Over the past week the news has been full of "outrage" and questions about whether bankers should get their bonuses this year. Talk of large chunks of the bailout going to top bankers and class-warfare type language.
But unfortunately this problem is not as simple as the government, or the "public" controlling the pay of an industry they don't understand. I'm a pretty hard-core democrat and yet when I hear talk of the US taxpayer wanting zero bonuses on Wall Street this year -- per a Bloomberg article today -- it concerns me that the public doesn't understand how talent works.
Our best companies are very, very competitive. In all but a very few rare cases, a company is only as good as it's people. And companies, like fish, rot from the head. It's a common adage in my world that A players hire A players and B players hire B and C players. Talent is everything. So, in the competitive world of banking it is essential for the long term health of our institutions that they keep the talent, within the institution if at all possible, and definitely within the country. Our best deal-makers will go where the money is and that had better be in the United States and at the institutions that make our financial systems work.
So while I understand that taking public money and using it to pay bonuses may be optically obscene -- and it is certainly a good idea for the very top management of the institutions to not take bonuses -- if that action is taken too far down there will be a negative backlash -- and the talent which is so critical to long term health will leave. There are too many other firms, and countries, that will be happy to hire them.
Follow Penny Herscher on Twitter: www.twitter.com/pennyherscher
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
Point #3: The kind of real "free enterprise system" that doesn't exist in this country - as Bobby Kennedy has so often tried to remind us – could be a powerful engine for economic and social growth. But this happens if, and only if, we think in terms of ROI in a "Triple Bottom Line" model. When we stop allowing corporations to steal from the Public Domain, and offload some of their legitimate costs of production back into the Commons, that will be a good beginning. But when we finally embrace the idea that any business should think in terms of enriching its shareholders, its workers, its customers, and its culture in some equal measure - we'll be amazed at what happens to not only our economy but also our collective quality of life.
Risk our best talent???? YES, PUH-LEEZE..... NOW!!!!!!!!!!!! DUMP IT! If that's the best Wall Street can manage, then it SHOULD fail! These people have raped and pillaged for years. Like Washington DC, they are completely out of touch with their country and reality. Each of them, and every one in DC, needs to have to actually WORK for a living for a year or two! Figure out how to buy milk and pay for heat. THEN go back to running financial markets -- possibly not into the ground this time.
Point #2: Somehow we lost sight of “who all” makes up the body of shareholders in any company. The only time there’s an actual infusion of capital happens when a company is born and/or taken public. From that moment on the sale of stock represents a transfer of existing ownership and not an investment. The real on-going investment in any company is made by those who work there. Yes, they are paid for their contribution, but generally a bit less than it’s worth – otherwise the company wouldn’t be making a profit.
A 430:1 ratio of CEO compensation to the “average production worker” does not reflect the relative value of that individual’s contribution. The management and Board of most Fortune 500 companies literally define “Incest, the Game the Whole Family Can Play.” The "Titans of Industry” and the Wall Street “Masters of the Universe” have grown so accustomed to thinking of themselves as “Special” that they've become absolutely tone deaf. It probably never occurred to the Big 3 Auto Dudes to fly in anything but a private jet - even to Washington with their hats in their hands. I’m sure that it didn’t dawn on Lehman Brothers/Barclay’s Bank that disbursing a $2.5B bonus pool to those who had mismanaged the company to bankruptcy was “inappropriate” Certainly AIG’s management appeared to believe that “business as usual” would include a “conference” at an expensive resort – at which to celebrate their federal windfall.
I'm not philosophically opposed to the "the profit motive” – just to way in which it’s been deployed in this country and the results of where short sighted greed has brought his nation. A few things to consider? And I'm going to try to "get away" with a 3-part post - please, Huffington Moderator, just this once?
Point #1) Bundling a bunch of assets into a “financial instrument” for the purposes of selling that instrument and generating fees does not necessarily add value to either the instrument or the overall economy. When that economy is growing at a rate of approximately 2-3% and you promise your investors a 15 to 20% ROI, only a couple of percentage points of that come from “increased liquidity” or “shared risk.” The rest comes from picking someone else’s pocket, and you’re counting on the fact that s/he’s too dumb or ignorant to notice that that’s what you’ve done.
What a moronic statement that we should pay wall street "Talent" the talent that has lost trillons of dollars
Her A list that hired A list talent is really F-d When Citi has assets worth 270 billion in 2001 and is reduced to 25 billion and shrinking ... extrapolate that to every bank that has been slopping tarp moneys and what talent are we talking about?
The Talent of blowing up companies turning healthy companies into zombie corporations Wealth destruction on a level never seen before?
I think a fence post in the corner office could do a better job. The fence post has more talent than most of the cocksure bankers pretend to have.
And another thing--the market mess is worldwide. Where will they go? Japan? Nope. China? They are bailing out. France. Bail out! London? Bailing. Dubai? Maybe. So they can drag the Middle East into the same kind of mess with their greed.
We need to pay the talent? Might I ask, "What talent?"
Are you speaking of the talent that caused this crisis? Are you speaking of the gamblers who don't believe that risk is a necessary element for earning rewards? Are you speaking of people who want the taxpayer to assume their risks?
The financial industry sucks out $650 billion from the economy every year. And what do they produce? Usually just paper but finally, inevitably a financiial crisis. Now that their boundless greed and hubris has brought on a global economic meltdown, they want bonuses for their talent?
Perhaps we should pay for their tickets to those other countries that desire them so much.
Ms. Herscher suffers from an illusion, i. e., that graduates of business schools are our "best and brightest." They may, in a few cases, have reasonably high IQ's, but most are only marginally educated. That's the problem. At my institution, when humanities prof's wanted business students to be required to take ethics, the the business school faculty representative said, "We teach ethics already in every business course." Of course, the actual behavior of our "best and brightest" on Wall Street has clearly shown that to be utter nonsense. We need to realize that being able to put a slick deal together doesn't mean you know why should or should act in a particular manner, or that you can fully appreciate the effects your actions might produce. When Ms. Herscher warns that apart from bonuses these "talents" will leave us for other countries, it's laughable-how could they? You can count on one hand the number of business programs that require students to take a foreign language, let alone acquire fluency. Besides, isn't it a business mantra that where employees are concerned mediocrity and especially failure is not to be rewarded? Why should we reward those at the top for being stupid? Get real! It's not as if these "talented" boys and girls are going to find such high saleries in any other line of work; they certainly are talented enough to play in the NBA, MLB, or the NFL.
Interesting article on this subject in New York Times (11/20/08 page A43 http://www.nytimes.com/2008/11/20/opinion/20ariely.html)
In two studies, the offer of a higher bonus led to poorer performance. See link above for full article.
Talent for Robbery and Pillage, citi bank steals from old ladies and poor folks sweeping up dollars and we reward that behavior thats talent?
Goldman Sachs sells CDO's out of the front of the house while betting on their failure in the back of the house that's talent?
Bundling CDO loans and buying CDS instruments and then nakerd shorting companies into the ground that's talent?
Bankers who sold people more loan than they could ever afford teaching them how to game the vetting process that's talent?
Paying out .022 percent interest on a savings account while charging 6.5 to 9% interest on a home equity loan that's Talent?
Charging usury of 29% for credit card purchases for people to buy shoes and food thats Talent?
That's Fraud lady that sure as hell not Talent. if the bums can't get buy on a 150 thousand dollars a year they have no talent for making the best of their own money, let alone anyone else.
Everyone is replaceable, tht has been the corporate motto just ask Jack Welch.
Talented for getting us into the mess we are in? That is the best and the brightest?
A simple solution that would allow these guys to compete over top positions and not be threatened with taking away their prized "bonuses":
Return to the federal income tax system as originally conceived. Tax rates go to 90%
Thus, the fight over who gets paid more (prestige) would be eliminated. Instead of 10 million a year, perhaps one million would suffice. The other 9 million could help keep their companies solvent!
I know engineers and handy men whot are as or much more talented than a CEO and believe me three are thousands of them which refutes your idea that there are very few people that they are so talented and indispensable to do certain jobs, that is falacy. That is not to say they may not deserve a decent compensation, say $500,000 a year? I know quite a few people that will take hald of that , be happy and don't become greedy.
Truly talented people could captain their ships and steer us out of this mess with as little damage as possible. Any time soon?
Dear Penny, it is evident that you have never read Connections or the European Dream... and the deal is that we are handicapping 30% of our children, that is not allowing them to have the opportunity that the rest of the children do because of our antiquated and underpaid education system in the South...Have you realized that the Japanese are taking jobs to Canada because of the education and healthcare systems, that even if the south is cheaper than the north, it just does not get the job done efficiently..
Connections is about all the infrastructure that is needed before ideas generate, even cultural cross currents to generate ideas.. and European Dream is about the recovery from WW2... Please realize that the majority of us, the bottom 80% have not benefitted in the last 30 years and now our 401ks are tanking.. We all worked hard to meet corporate goals that allowed the CEOs to take the credit and the money even in spite of them...I will never forget reading about the RailRoad Brakes, they were invented by an engineer to save lives, but the CEOs decided it was cheaper to allow the brakemen and people to die...It was only REGULATION that required them to put the brakes on the trains...
I am happy for your success, but it was based on an infrastructure that is now at risk...
This post is absolute proof that Ms. Hersher is right. Most people want to demonize anyone
that is smarter and more talented than they are. The reason that you don't get compensated
the way top management does, is because you are not as smart and can't do the same job.
These people don't have to go to third world countries to be compensated. There are plenty
of countries with just as many "amenities" as we have. But the average American thinks that
only the U.S. has luxuries. Get a clue, Europeans invented luxuries.
Ok cubalibre, alias hot shot...
If she is so right and you are too, then please explain why neither of you is prepared or knows how ...
TO DIG US OUT OF THIS MESS?
FACT IS THAT NEITHER OF YOU KNOW HOW:(
Please don’t be naive, talent has got little to do with financial success in US big business. In the US, it has to do with connections through family, school and social interaction.
High salaries and bonuses to an extent that they do not exist in most other industrialized countries are do to a rigged process and very weak corporate regulation.
It may come as a surprise to someone like you and Ms. Herscher, but human potential doesn't vary all that much. What varies greatly is opportunity that, in the US, is hindered because of a nineteenth century class structure
I want to demonize people that are "smarter and more talented" than I am? Really? Let's ignore the rather gratuitous insult - after all, you have no idea about my intelligence or talent, rather, you just assume that everyone has the job they deserve.
But let's stop and think for a minute. How much compensation does an employee deserve when that employee leads a profitable business to the brink of bankruptcy? How much talent does someone need to mis-manage a company to the point of requesting a multibillion dollar bailout to keep your company in business?
For most of us lowly peons working out there, "bonus" means extra pay for having done a good job, above and beyond what is expected. We do a bad job, we don't get a bonus. Why should that standard be different for an executive?
When an industry has a problem like this one has had, one of the first things that should be realized is that our old view of the meaning of "talented" needs to be revised. "Talented" people don't sink the world-wide economy to line their own pockets with as many dollars as possible - I would use a different word to describe that and won't cry at all if people who manage to keep their jobs through this shake-up lose a bonus or two. I sincerely doubt that by doing this we'll be risking the mass migration of rich Wall Streeters to up and coming countries lacking so many of the easy amenities to which they've become accustomed.
As a mere worker (and lifelong Republican) I find the idea of giving any of the yahoos (whether bankers or auto execs or anyone else) money after they ran their businesses into the ground obscene to say the least. I work hard to do a good job (in fact I do a great job) for a fraction of what these plutocrats get and I don't expect millions at the end of each year. The real reason that this economy is about to do a Krakatoa is that unlike almost every other country in the world in the last quarter century we have actively rewarded only the ability to garner a good salary, not the ability to actually run a company.
Amen, brother!
You must be logged in to comment. Log in or connect with
