The pay of the bankers is not the issue; rather it was the bonuses they continued to get after the meltdown. I don’t know what their contracts say, but our bonus system is very clear about the impact of losing money on bonuses. Usually you get nothing, or very little, if the company loses money, which is what bonuses are all about. If the bankers bonuses were to be given no matter what, they are a joke.
At the time we heard that if you wanted the best people you had to pay. Odd this doesn’t seem to apply to teachers, isn’t it?
Isn’t one of the first tricks of dictators everywhere the declaring of a crisis and the suspension of laws to deal with it?
Respectfully disagree. “Bonus” is just a term meaning money not explicitly titled as salary. Beyond that, it can mean anything the company/employee agree that it means, regardless of what everyone else thinks.
There might be many reasons to give bonuses even though a company loses money in a year. A few examples:
- If your business relies on talent and the industry is rampant with talent poaching, you may wish to retain employees by paying more and hoping to return to profitability the next year (perfectly normal cost/benefit analysis).
- If you have profitable departments that did well, you may want to reward them even though other departments caused a net loss. This is the heart of pay for performance (again perfectly normal).
- If you’ve purposely lowballed salaries and use bonuses to keep employee pay otherwise competitive, then you really can’t go shorting bonuses and expect people to stay (again normal).
At the end of the day, bonuses are just another form of compensation that go into the employee supply/demand equation. If you don’t pay people enough to stay, they leave. Whining that the company had a bad year may be beside the point if employees have other places they can go.
Not defending bankers here, just exploring bonus methodologies.
The bankers were given bonuses and huge salaries when they failed miserably at their jobs. There should have been wholesale firing of the bankers. there were plenty of highly qualified bankers and economists to man the banks. We had no reason to keep the ones who destroyed the world economy.
If they wanted tax money to save them, they should have been under Fed rule. We should have taken a bank over to supply loans to small business. We should have broken the banks up to kill “too big to fail”. Instead we consolidated the banks even more.
There’s a lot of spin coming from the people that head companies and the boards that compensate (and in turn are compensated by) those really valuable employees. If we could afford to fire all the air traffic controllers and restaff from the leftovers, I gotta think there is a good supply of bankers that want to move up in the ranks.
Some people on this board bought that the bankers were so educated and so smart that they were irreplaceable. They6 were greedy thieves who brought the economy to its knees while making themselves extremely wealthy in the process.
We know money translates to political power. The bankers had it in piles. Greenspan should have been lynched. Paulson should have swung from the same tree.
I’ve been working under various bonus systems for over 20 years. Some year I made a lot of money, some years nothing. For us, at least, there was an explicit formula for handing out bonuses that often depended on company performance, division performance, and individual performance.
In the case of Wall Street, those in divisions which lost a lot of the money still got the bonuses. (For instance, AIG.) Given the massive number of layoffs, it is rather hard to me to credit retention as a major factor. Sure, a few super stars may have gotten extra money for this reason, but the bonuses were a lot more widely spread than that.
I’m not denying that the bonus plans were written to give money no matter what - just saying that makes them not beneficial to the company or its shareholders.
When bonus plans began for the company I worked for, they were sold as a way of not locking in raises during good years which might require layoffs during bad years. They were also a way of sharing one year windfalls. All very reasonable - but not if they effectively become raises. One of the root causes of the crisis was that traders benefited from short term gains but were insulated from the negative long term effects of those short term gains. Still the case, as far as I can tell.
There’s a difference between contracts which are “easily negated”, and contracts which would effectively have been negated by bankruptcy if not for bailouts.
I’m certainly not defending the banksters, but I don’t see the relevance to individual contracts in the method by which the employer avoided bankruptcy, unless those avoidance steps legally released those contractual obligations. As far as I know, that wasn’t the case. -Now, perhaps that should have been done through legislation during the bailouts, but it wasn’t.
Being a good socialist, I would have favored government receivership and eventual establishment of the bailed out institutions as several smaller ones legally prohibited from ever becoming “too big to fail.” But that didn’t happen either.
It’s the Golden Rule baby. The people who have the gold make the rules.
If I was the president or the AG, the bankers’ contracts should have been lawfully terminated “for cause”, namely, poor job performance. Any banker who wasn’t happy with that result would’ve been welcome to sue the US Government in Court. Good look with that.