Executives Have Their Pay Cut; How Do I Feel?
On Thursday, the “Pay czar” of the United States (I didn’t even know we had such a thing) decided to slash the salaries of those bank executives from banks that the administration gave bailouts to. These slashes were drastic, and were in response to bonuses that had to be paid out to brokers who, somehow, were a part of helping the Dow Jones break 10,000, and had incentive clauses in their contracts.
Pay czar Kenneth Feinberg reworked contracts for the 25 highest-paid employees at five financial firms and two automakers who were the biggest benefactors of the bailout. He’s cutting their compensation 90% for the rest of the year. He did say he wouldn’t go backwards and take some of what they’ve already been paid back. This involves: American International Group; Bank of America; Citigroup; General Motors; Chrysler; GMAC; and Chrysler Financial.
To say that the American public was up in arms is more muted than how people actually reacted. Some folks lost their minds when they heard about the bonuses being paid out. I can’t say I blame most of those people. After all, the Dow has gone back and forth since it hit 10,000, and the weekend ended with it under that mark again. Also, it wasn’t really these companies that had much to do with the Dow getting to 10,000 either. Citigroup and Bank of America posted big losses. Chrysler did post a profit, but they also sold 20% of their company to Fiat, so that might have helped some. Overall, these companies haven’t quite lit the world on fire with the bailout help, and, it seems, the banks might either need some help or, as many believe, should be left to burnout and go away.
How do I feel about cutting salaries? Oddly enough, I have to say that I had mixed feelings, but I don’t now. Initially I thought the government was going after everyone at these companies, and I had a problem with that concept. Seeing that it’s limited to 25 people total, I don’t have those qualms anymore. One of these guys, and I don’t remember which one right now, still earned $10 million last year. Another, who had dropped his salary to only $1, still earned $40 million in bonuses and incentives. For a bank that had been bailed out!
That’s not criminal, but how could anyone not see that as a problem? I don’t have a problem with incentives for employees because that’s just how the world works. But for these executives to take that much money after having to be bailed out; that’s just a shame. I’m one of those people who never holds it against anyone for making the money that someone is willing to pay them, but in this case I’m making an exception because the bonuses that were earned were false. The salary part, I really don’t have as much of an issue with, but lessons have to be taught, right?
One of the Bank of America executives said that cutting these salaries could result in talent leaving these companies for greener pastures, which meant companies that didn’t have to accept the bailout. To me, it seems that one of the problems with these companies is that they didn’t have any real concept of how to recruit, or at least evaluate, talent in the first place. That’s not uncommon, but it’s still frightening. If the only “talent” someone has is making money, but they have no discretion, I don’t know that I want that kind of talent on my staff. At the same time, I also don’t want the kind of talent that feels everything can be fixed by slashing workers and protecting profits above everything else. There has to be a balance after all.
Those are my thoughts; what are yours?