Does Wall Street Place Employees Above Shareholders?

23 July 2008

1 minute read

Does Wall Street Place Employees Above Shareholders?

Wall Street gadfly James Grant, who has published Grant's Interest Rate Observer since 1983, wrote in a recent Wall Street Journal essay that:

"The big brokerage firms are not in business so much to make a product or even to earn a competitive return for their stockholders. Rather, they open their doors to pay their employees -- specifically, to maximize employee compensation in the short run."

Do you think that "to maximize employee compensation in the short run" is Wall Street's primary goal?

If so, does the situation call for any type of reform, such as altering compensation practices or restricting banks' use of leverage (the central villain in Grant's piece)?

Or, should government - instead of providing a safety net when things go wrong - punish institutions for reckless behavior (another reform Grant seems to want)?

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4 comments

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Michelle Rosenbaum
6 August 2008
Life is tough. Every person is focused on the bottom line, when in fact, more focus should be on managing and running a good accounting system that gives you what you want from day to day so that decisions can be made with verification. Management would be happy, shareholders would be happy and worker employees could work.
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Douglas Amato
4 August 2008
They only care about the top Execs. They do not give a damn about the employees in the trenches each and every day. They promise us a stake in the company and give us stock options. I personally have about options which would allow me about 8000 shares, but those options are $30.00 out of the money and expiring. With their ridiculously high salaries the top execs do not feel the pinch we in the trenches feel. They are not worried about finances when they retire, but we in the trenches worry all the time about this. Working in a stock brokerage for over thirty years I have a very personal understanding about the double standards and lack of caring for their employees. They use their HR departments, not as a tool for helping employees, but as a tool for replacing and dismissing their employees without repercussions to themselves.
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Harsh
31 July 2008
I believe, most of the employees of the company are also shareholders. Therefore, from a firms perspective, satisfying the employees will also satisfy a certain percentage of shareholders
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Fr33dom7
31 July 2008
If you are speaking of the CEO's and other high-level officers, yes compensation comes before the interest of shareholders. When was the last time you saw a failed CEO who supposedly "resigned" walk away without a "golden parachute?" However, if you are speaking of average "employees," very few firms give a damn about them, even though they are the ones who make the wheels go round day in and day out. That's why "job hopping" has become more prevalent. Employees recognize there is no such thing as employer loyalty, so more and more are looking out for their own best interest. They recognize that employers are a fickle lot, driven by a bottom line that they are not inclined to improve through their own personal sacrifice of accepting smaller paychecks. Instead they short-staff and pile on their already overstressed workers. Ask anybody who works for an investment bank how that's been working out for them.
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