What is Goldman up to nowadays? Oh, just raising compensation by 3.5% despite a projected 13.5% decrease in revenue. Do they call that a lack-of-performance-based raise?
For years the public mostly turned a blind eye to Wall Street’s corporate practices, including the lucrative (and ludicrous) bonuses and salaries paid to top executives, largely for speculative trading. Wall Street produces no products. But so long as their companies made enough to pay out such exorbitant amounts, we rationalized, what was the problem? The financial collapse should have served as ice water poured on our snoozing faces. Incentivized by a pay structure that valued risk, we were all led to the brink of disaster. It was only the infusion of $450 billion in taxpayer money that saved us from The Great Depression, Part II. So why on earth are Wall Street’s top companies set to pay a record $144 billion in compensation this year?
I feel like a broken record. Yes, the majority of TARP loans have been repaid and we are on the slow road to recovery, but we cannot become complacent. The next step must change the paradigm. It must tighten regulation and oversight of corporate compensation. And that applies to all companies—even the unassailable Goldman Sachs, which was saved by the rescue of AIG, its principal insurer. What is Goldman up to nowadays? Oh, just raising compensation by 3.5% despite a projected 13.5% decrease in revenue. Do they call that a lack-of-performance-based raise?
This is why we need regulations sooner rather than later. SEC Chair Mary Schapiro (no stranger to compensation issues) at last has detailed a timeline for the regulations that will soon govern the entire industry.
Most of the Commission’s timeline occurs before the New Year, but that is not soon enough. We propose a more immediate solution to the compensation problem: redirect any salary or bonus that is based on purely speculative trading towards public infrastructure. Instead of paying millions of dollars to each executive that nearly ran our economy into the ground, let’s use the excess to modernize transportation systems, fix bridges and pay teachers.
It won’t happen but it should. Let’s hope the SEC gets in gear and moves quickly to enact effective rules to protect the public from another crisis.
Assisted by David Martin