Wall Street is enduring unprecedented public scrutiny and political pressure over its pay model - both for 2008 year-end bonuses, and how compensation will be structured in the future. This poses a formidable public relations challenge for those institutions that refuse to bow to demands for a company-wide and industry-wide bonus moratorium.
If the industry really cares to defend compensation, "it has to be articulated in bumper-sticker sized phrases," declared Cognito, a prominent financial services PR and marketing firm.
The industry's message should begin by educating the public about the critical distinction between C-suite executives and hard-working pros in the trenches, and between banking and most other industries whose employees work primarily for fixed salaries rather than highly variable salary-plus-bonus packages.
Stop Calling it a 'Bonus'
To do this, banks should emphasize that the word "bonus," is a misnomer. Year-end incentives constitute the meat of most banking professionals' compensation packages. Few on Wall Street work primarily for the salary (what's called "base" - a word that perfectly describes how people in the business view it).
Firms also can emphasize that most finance professionals neither make seven- or eight-figure incomes, nor were involved in creating or selling "toxic" products such as asset-backed CDOs. Nationwide, about 850,000 individuals are employed in securities dealing, trading or investment management. Many work in administrative and support roles, and earn incomes that - although above what other industries typically pay for similar work - show a human side of banking the industry's critics are working hard to obscure. By presenting concrete, detailed, real-life portraits and testimony from such individuals, the industry can counterbalance the cartoon-like caricature of Wall Streeters as Porsche-driving, Rolex-wearing, island-hopping tycoons.
A third promising tack is to point out that the bailout program's temporary nature has direct implications for firms' compensation practices. Having invested taxpayer funds in the industry, the government needs an exit strategy that keeps banks functioning well enough to have a strong chance of returning to full private ownership. If total compensation is slashed and individuals' pay is effectively subject to congressional review, risk-takers and innovators will gradually migrate elsewhere. Financial firms will be left to repopulate with individuals who accept high levels of transparency and public oversight of their own compensation packages - in other words, with the kind of individuals who seek public service-type careers. After five years, it might no longer be practical to return a partially nationalized bank to the rough-and-tumble private sector.
At the moment, the idea of turning Wall Street into a clone of Washington seems to give some voting taxpayers a pleasant feeling of schadenfreude. By awakening these taxpayers to the fact Wall Street would consequently remain a permanent ward of Washington, the industry can help them recognize where their true interests lie.
What Goes Around, Comes Around
For the New York area in particular, the following points cited by Crain's New York Business also are worth noting:
- Taxes paid by Wall Street employees and firms generate 20 percent of New York State revenue and 9 percent of New York city revenue - supporting such vital services as education, health care and police.
- Securities industry workers represent New York's single most important pool of apartment buyers propping up the housing market in the city, according to at least one real estate expert.
- Even with an average $360,000 in income, most Wall Streeters not only don't live a life of luxury - they can't even afford one, given the cost of living in New York combined with the high level of job insecurity in finance even in good economic times.
- Even the upper crust of Wall Street leaders who are truly wealthy contribute to the quality of life in New York through charitable and civic projects. For instance, four of the six main sponsors of a recent fundraising dinner for a New York Public Library expansion project were financiers.