Who Are the “Best People”?

Bank of America and Citigroup, two of the large Wall Street firms that received TARP money are balking at Compensation Czar Kenneth Feinberg’s policy announcement that halves the compensation packages for the top twenty-five executives in each company. AIG is another that faces the same scheme. In fact, there are seven companies that fall under the new compensation limits. These seven are protesting that they will lose their “best people” to competitors who are not held to the same new standards because the competition have either paid back the TARP money or never required any in the first place and therefore are free to pay whatever compensation they like.
This raises an important set of questions: Does the market place set compensation in any sensible way? What is meant by “best people”? Were the exorbitant pay packages that the so-called “best people” received last year justifiable even though their decisions brought the world economy to its knees? Are the present “best people” the same kind of “best people” who ruined the economy or are they a new kind of “best people”? Does the compensation structure these companies want to retain set the world economy up for another disaster?
If the average CEO makes astronomically more than the janitor who cleans his office, is that sensible or is it simply greedy? What makes that CEO that much more valuable than the janitor? If the CEO steers the corporation to greater profit and long-term stability, then perhaps his high pay package is justifiable. However, when he steers the corporation into bankruptcy and affects the economy far beyond his corporate realm, should he not receive at least a substantial pay cut until he brings the corporation back on course? I would think so.
I spent my career as an educator. Many former students of mine went on to work on Wall Street, and they did very well, but they were not the brightest students I ever taught. They were good people with strong ethics and a powerful sense of responsibility. They learned sportsmanship on the playing fields. They went to good colleges, earned B’s and C’s, played a good game of golf or tennis, and kept their integrity safe. They were not MIT whiz kids or star Harvard Business School grads: they were just “good people,” but not the kind of “good people” these TARP-takers are fearful of losing. No, those whiz kids know how to make money at any cost, faster than you can sneeze. And the amounts they are able to compile are nothing to sneeze at, in the short run.
So to answer the first and second questions, I would have to say that the market place will never set sensible compensation. The compensation on Wall Street is based on pure greed, not any rational criteria. The so-called “good people” who demand the exorbitant salaries and bonuses are completely self-serving, unlike educators and other public servants who are truly better people because they are willing to sacrifice a high salary for a greater good. Would a higher salary attract a better caliber of teacher? Maybe it would. However, I doubt offering a six-figure salary would attract the kind of caring good people who are effective, in part, because they care about their students. The same could be said of police, fire-fighters, etc. They are not attracted to the job solely because of the money. A six-figure salary the Masters of the Universe on Wall Street consider pocket change. To argue that Wall Street demands are rational or reasonable is ludicrous. It is another example that the market place is not a place where reason resides. These exorbitant salaries are completely irrational and unjustifiable in any real sense. In the realm of imagined demand in relation to a spurious notion of limited supply of so called “good people” is the realm of nonsense. Wall Street has lost its moral compass completely when it comes to defining “goodness.” If what they mean as “good” are the knuckle-heads who got us into this mess to begin with, then they need a course in basic logic and another in basic ethics. Good at making short-term money at the expense of long-term financial well-being on Main Street is not a very good “good.”
When financial institutions are interested in making money without any concern for the greater good, they do not serve the economy. They are not really investment banks except in a completely self-serving sense, and a short term self-serving sense at that. To argue that they’ll lose “good people” if their compensation is reduced suggests that regulation has a long way to go before Wall Street begins to serve Main Street, a principle which would benefit our nation as a whole. I would argue that investment that creates jobs and produces goods that can be sold abroad would be a noble goal of Wall Street. But it seems that most of the so-called “good people” on Wall Street are only interested in concocting the next scheme to dupe investors into investing in that next “too-good-to-be-true” financial smoke and mirrors product.
Basing Wall Street compensation on reduction in domestic unemployment rates would be a good trigger and incentive for Wall Street to invest in America. It just might get them to lend money again. Let’s start by setting the trigger at 6 percent. When unemployment drops to 6 percent, the Masters of the Universe get their cookies.
As David Brooks points out in one of his NYT columns, the Obama administration is creating incentives for governors to compete for federal grants by showing real reform, not just lip-service. Why not make those who created the economic disaster reform as well and be made to compete for their bonuses based on indices other than pure, short-term profit. One index would be unemployment rates which are directly tied to how well Main Street is doing. Main Street’s success is dependent on Wall Street’s investment in real productivity, not in shell games.
The larger question is whether or not Wall Street is capable of doing good as well as doing well. And are they capable of thinking long-term or are they merely focused on short-term profit and to hell with the long run. If the quintessence of capitalism remains that selfish and shortsighted, the whole system is in dire jeopardy. Whatever happened to the “good people” I used to teach who maintain their integrity at any cost? Were they left behind by the whiz kids, the “rabbits”? I hope Aesop is still right and that the tortoise will again cross the finish line first, and the ants will survive the winter while the grasshoppers die. In short, Wall Street has to stop thinking its only purpose is to make quick money. If we all thought that way, there would be no common good. There would be no good, period. It’s long past the time that Wall Street take on its proportional share of looking after the common good. After all, it is the purse strings of the economy and has a major responsibility to actually care about the society it exists to serve. When it started thinking that society existed to serve it, that’s when it got into trouble.
Meanwhile, will someone please explain to me the difference between these so-called “good people” on Wall Street and Ponzi schemers? We need to reincarnate William James to write a new book called The Varieties of Ponzi Experience. Or maybe we simply come up with categories like “soft Ponzi” and “hard-core Ponzi” parallel to the concepts of soft porn and hard-core porn. Or we could have Wall Street and Stonewall Street. Whatever the case, let’s replace the so-called “Good People” with the real thing.