OK, I'm sick of people making a big deal about the recent Wall Street bonuses.
First of all, the top tier at major banks did NOT get bonuses. This includes executives at Citigroup, AIG, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Merrill Lynch. These people are the target of much anger, yet they did not receive any bonus.
Second, the $18 billion reported to the New York State comptroller includes all firms classified as "financial institutions" which is not compromised solely of poorly performing banks. You've got smaller community banks, funds, agencies, as well as investment banks that did not get any federal funds. If you consider the entire financial industry in New York, $18 billion is really not that much.
Third, much of the bonus money went to rank and file, like HR personnel, administrative assistants, call center reps, IT support and developers, accounting, internal legal counsel as well as professionals who earn on commission or whose individual business units actually turned a profit last year. As much as everyone hates on Wall Street employees, the vast majority are just people working hard to make a living, like anyone else. They had nothing to do with the bad financial decisions at the top and are simply being rewarded for doing well at their particular job.
Fourth, that $18 billion is before income taxes. Uncle Sam and local governments get close to half that amount as revenue.
And last but not least, most people bitching about this aren't thinking about the flip side. If they were offered similar bonuses, would they refuse, due to some "taxpayer money shouldn't be spent this way" principle? Not a chance.
So seriously, folks, shut up already!
3 comments:
I gotta be that bastard that is going to say one more thing :).
I hear ya that there are a lot of people in finance where bonuses make up a large percentage of their salary, and therefore their spending habits are different (so cutting out bonuses all together could be a huge problem), thus some bonus probably needs to be maintained.
However, I think where the gripe is coming from is people in other companies (particularly small companies) where you only get bonuses if you *and* the whole company has done well. A lot of us that are still happily employed are looking at empty bonus checks this year because there is simply too little cash to spare. Which is a risk I think a lot of people expected when they signed on.
So, you have hard workers who did a good job in some non-finance company, but since their company is broke, you get no bonus. Kinda crappy, but you can live with that.
However, on the finance side, there are also hard workers who did a great job, but their company is broke, *and* we are paying them to get back on their feet out of our own pockets, *and* they get bonuses.
You have to admit its kind of a salt in the wound deal.
I think this whole thing would have been handled better if they would have reported the dollar amount spent on bonuses from last year. (I'm assuming they've been curtailed...but I could be wrong). So then, people may have realized that there was a huge hit to the bonus plans on the finance side too.
Anyhow, I'll stop adding to your headache :).
I don't know about spending habits (to me, bonuses shouldn't be tied to "lifestyle" needs). But you are right about the bonus being a large chunk of annual salary. For example, in my business unit, a developer with 8 years experience makes a base salary of 60K which is stupid low. But then they get a bonus of 15K which brings them to a reasonable level. If you deny them that bonus, they take a 20% pay cut. Even if you only give them half, $67K is just not a competitive salary. Don't ask me why finance companies structure their salaries this way, they just do.
It was not nearly as widely reported, but the $18 billion is a 44% drop from last year.
Also, several banks were actually FORCED by the treasury to accept taxpayer money. Remember that famous meeting of nine bank heads? About half those banks actually DIDN'T WANT money from the government, but it was forced down their throats. If the fed came to any other company and said "take this money or else!" could you really blame them for spending it on their employees? (if in fact, those bonuses did come from federal funds -- unfortunately, no accountibility was required there). Really, people should be griping at the government, rather than the recipients of the funds.
So while I can understand people being pissed, I think they are pissed for the wrong reasons and at the wrong people. I myself am pretty damn angry at congress and the treasury for their epic fail in handling the TARP funds.
I agree that the federal bailout has been ineffective, ill-explained, and poorly executed. I very much disagree with your defense of the bonus situation.
I certainly have no issues with bonuses being distributed by financially healthy (or less sickly) companies. What I object to is the fundamental lack of prioritization shown by financial services companies.
$18 billion is $18 billion that could have been used instead to cover operating expenses as losses from underwater mortgages and failed mortgage-backed investments come in. It should be used as a contingency buffer for when other commercial loans begin to default as the economy worsens. What I object to most in your post is the attitude that people are entitled to bonuses.
The very fact that compensation is being distributed as a bonus and not as base salary makes it philosophically and legally at the discretion of the company's board of directors and C-level officers. The public outcry isn't against your developer who is receiving the money, but against those at the top of the companies who effectively have decided to claim that their financial health is strong enough to distribute discretionary compensation. No matter that some companies may not have *wanted* to accept TARP funds-- almost all Wall Street firms have *needed* them. Which indicates, logically, that in a financial bind a conservative approach to spending is expected.
To make an analogy to another industry, I look at the automobile companies and unions. This is a more extreme case, as unions have outright stonewalled negotiation in the past (i.e. strikes) to reach favorable terms for themselves and their members (in that order). Wall Street workers are hardly as egregious. But the basic principle of compensation in the form of extras (health care, retirement, bonuses) NOT being "owed" to the workers applies. First and foremost must come an evaluation of the health of the company. Then, when the company can afford to do so, the employees can share in the prosperity. To take a cut in the face of dwindling assets and cash flow flies against the concept of fiduciary duty.
To demonstrate a nuance, let's take the fact that AIG and other firms have made large dollar investments in other countries. The same sort of public outcry came about-- how dare they indirectly take taxpayer money and invest abroad? I disagree that this situation is an issue, as long as those investment are proven to have a net positive impact on their cash flows and balance sheets. In other words, a company's executives must first and foremost have their fiduciary duty to their shareholders and to the ongoing health of the company as a whole in mind-- even above their employees.
Without a financially viable company, the employees will suffer even more. There are plenty of companies that have enacted salary freezes or reduced payroll (base pay, not bonuses) by x% in order to meet the operating expenses in the near-term. To ask Wall Street to do something not nearly as drastic is, in my mind, only reasonable.
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