Our Take: Managing Banks By Sound-Bite
The White House and Congress are joining forces in a move to seize the compensation many of you are now receiving for the work you performed last year.
It's a novel way to get some American consumers spending again. What better way to spur Wall Streeters to blow their estimated $18 billion year-end take in the malls, car showrooms and condo market than tell them, "We're coming to take back your bonus."
We have to admit, we're tempted to point out the numerous false premises behind President Obama's characterization of recent payouts to financial services workers as "shameful" and irresponsible. We want to shout into critics' blockaded ears that those payments, mislabeled "executive bonuses," actually went to financial services employees at all levels (79 percent of you, according to our recent survey of 900 registered eFinancialCareers users) and often make up a vital chunk of total compensation for even first-year analysts, settlement clerks and HR professionals.
But we did that repeatedly last autumn, when anti-bonus agitation mushroomed from Main Street to the Capitol. And we've already lost that argument on the numbers. Not economic or balance-sheet numbers, mind you: I'm talking about polling numbers. Like the ones Bloomberg News and the Los Angeles Times found in early December, when they asked 1,000 Americans if banks should cancel all employee bonuses for 2008. (Seventy-six percent said they should if the institution received government aid.)
Clinging to Fantasy
President Obama's headline-grabbing remarks Thursday, not to mention the tone of reader comments popping up here and elsewhere, make it evident public sentiment hasn't changed much. Beyond the canyons of Wall Street, people continue to unfairly caricature all financial professionals as value-destroying and pathologically greedy fat cats.
The masses don't want to hear that meeting payroll (i.e., compensating employees you want to retain) is the first duty of any going-concern enterprise. They don't want to know that a corporate jet, or even museum-quality art in a corporate office, often serves key business goals and therefore can be a legitimate and justifiable expense. They prefer to pretend that Goldman Sachs, JPMorgan and other profitable financial institutions somehow magically ceased being going concerns as soon as they accepted government money or posted a net loss for one quarter.
Reading Obama's tongue-lashing of Wall Street along with some of the commentaries it spawned, we get the feeling the president knows he's addressing political considerations, not economic or public-policy ones. Both Sen. Christopher Dodd (D-Conn.) and White House press secretary Robert Gibbs worried aloud that Congress would pull the plug on any further aid unless Wall Street throws the masses a bone by taking a harder line on compensation and other spending.
The message that Washington (and Albany, via New York Attorney General Andrew Cuomo) is sending to Wall Street decision-makers is coming through loud and clear: Forget about running your business. Start taking care of your image.
Dodd: Reclaim Bonuses By 'Legal Means and Otherwise...'
Citi flip-flopped on its jet purchase not for lack of business justification, but because it generated disastrous PR. Merrill's pre-merger bonus payouts are under fire for the same reason. Cuomo says he'll look for a way to garnish those. And Dodd is "not urging, demanding" that Treasury "figure out some way to get the money back" from all Wall Streeters who received bonuses, regardless of employer. The Hill even quotes Dodd saying, "I'm going to look at every possible legal means and otherwise to make sure this money gets paid back."
"Every possible legal means and otherwise..." (Echoes of Malcolm X's "By Any Means Necessary"!)
Could this stampede toward banking by sound-bite be a concrete harbinger of Wall Street turning into a clone of Washington, as we warned last October? Stay tuned.