I think this quote by Nell Minow sums up what most people feel about bonuses for employees at bailout-receiving investment banks:
“I’m just flabbergasted that the financial community has failed to show any sense of leadership on this issue and doesn’t seem to understand how angry people are at them,” said Nell Minow, editor of Corporate Library, a Portland, Maine-based corporate-governance research firm. “They are just a bonus away from having the villagers come after them with torches.”
Actually, I think some people would like to skip the ‘bonus away’ and go straight to the torches segment. Let’s put this context:
Even without bonuses, Wall Street’s traders and bankers typically receive salaries that range from $80,000 to $600,000 a year. That compares with the mean annual wage for the average U.S. employee of about $40,690 and a mean for CEOs of $151,370, according to a May 2007 Bureau of Labor Statistics report.
For many on Wall Street, those salaries aren’t enough. Top employees expect to receive bonuses that can be in the millions or tens of millions of dollars. Lloyd Blankfein, 54, Goldman’s chief executive officer, was awarded a $67.9 million bonus last year on top of his $600,000 salary….
“When you work on Wall Street and you get no bonus, that is a huge shock to the system,” said Bill Coleman, chief compensation officer at Salary.com, a software provider based in Waltham, Massachusetts. “Wall Street has created this mindset that most people find obscene, which is that it’s hard to live on just half a million dollars a year.”
Very hard, indeed. This is considered normal cognitive function in a business that just wiped out its last four years of profits.
So now, break out the big babies:
A Morgan Stanley investment banker in Europe, speaking on the condition that he wouldn’t be identified, said his bonus last year was five times his salary and that he would quit if he didn’t get a bonus this year, unless his salary was doubled.
And do what exactly? Where else is he going to make this kind of money? I suppose he could become a scientist–we make loads of money. As Ian Welsh notes (italics mine):
The industry is overpaid for the value it brings to the economy. It’d be one thing if they’d made real profits, not engaged in wholesale fraud and not screwed up so badly that their overleveraged mistakes threatened to bring down the entire world economy, but they did all those things. Their standard bonuses are based on financial numbers which were not just fraudulent, but based on out and out lying and crookedness.
The gravy train needs to end. And if the entire industry is forced to cut wages in 1/4, well, folks like this can leave…. And join the real economy and find out that jobs that pay multi-hundred thousand dollar (or multi-million dollar) bonuses, pretty much don’t exist outside a few sheltered enclaves….
Enough with the sense of entitlement. Enough with the “best” people. Let’s get some second raters in, it’s hard to imagine they could blow it any worse than the self-congratulatory imbeciles who call themselves “the best”. As for the “best”, they should be grateful no one is seriously talking about clawing back their previous bonuses; bonuses based on systematic fraud and overstatement of profits through financial chicanery.
Yes, in a modern economy, we need a financial sector, but it is receiving far too many profits given its relative importance. Case in point: the money we gave these companies–roughly one-third of the entire U.S. budget–was supposed to relieve a liquidity crisis so the economy wouldn’t crater, not be sunk into salaries. More about that later…