It's easy to sneer at what passes for frugality on Wall Street when it comes to compensation... so let's indulge for a moment. From today's Wall Street Journal (I think it's a free link, but if not you can get the gist from the excerpt below):
Yes indeedy, "real leadership" -- give up the high six-figure salary but keep the seven-figure bonus. And of course, the 1998 bonus of a soda-pop CEO is one or even two orders of magnitude lower than what is available on Wall Street in a good year.
In a sign that Wall Street is waking up to the political tempest over billions of dollars in year-end bonuses likely to be paid out at securities firms lining up for government infusions, top executives are in discussions to possibly cap their own compensation, according to people familiar with the situation....
"There are going to be some people in the financial-services industry who will show real leadership here and recognize the reality of the situation," one senior Wall Street official said.
At least one major firm has looked at formerInc. Chairman and Chief Executive Roger Enrico's move in 1998 to give up his $900,000 salary. Instead, Mr. Enrico asked PepsiCo directors to fund scholarships for children of "frontline employees." Mr. Enrico still got a $1.8 million bonus that year.
I have mixed feelings about this. I'm a fervent capitalist and I lean libertarian, so I believe salaries and other prices should be set primarily by markets, not by government decree. I toiled in the Wall Street vineyards for many years, mostly at Merrill Lynch, and I believe my old firm and its competitors play a crucial role in the economy. I was support staff, not a revenue producer, which meant my annual bonus was a fraction of my salary, not a multiple. But I never complained about executive comp, because when the poobahs got more money, so did the gumbies.
Vermont Senator Bernie Sanders, a self-described democratic socialist, has renewed calls for capping compensation for executives of bailed-out companies at the $400,000 salary of the U.S. President. The idea has a lot of populist appeal -- even John McCain expressed support for it during the height of the turmoil last month. (I could probably scrape by on $400K a year. I'd like to give it a shot, anyway.)
But I suspect the best financial minds on Wall Street will continue to find ways to reward themselves handsomely. If such a limit could even be enforced realistically, it would simply drive the top talent into less-regulated pursuits. Do we really want to move the center of gravity of global finance out of the public securities firms and into hedge funds?
So, what should be done about the admittedly scandalous prospect of paying zillions of dollars in bonuses with money ponied up by taxpayers? I dunno... that's above my pay scale.