You Want Names? We'll Give You Names

As justified as it is to scream at Wall Streeters making stupid amounts of money, be honest with yourself: Most of us would quickly loosen our moral values if an eight-figure income were dangled in our face.

If someone came to me and said, "Morgan, securitize these subprime mortgages, and we'll give you $10 million a year," guess what? I'd probably do it. You probably would, too. Whether that's morally right doesn't supersede the fact that money is probably the single most powerful tool for influencing behavior.

The outrage over Wall Street pay, then, shouldn't be directed at those receiving it so much as at those authorizing and enabling it.

That's why plenty of us here at the Fool nodded our heads in agreement when we heard Nell Minow, chairwoman of the Corporate Library, say this in The New Yorker about bonus bonanzas:

It drives me absolutely batty that you will not see, in any of the news stories about these bonuses, the names of the compensation-committee members who approved them. Is there any other story in journalism where you don't get the who? Isn't that one of the seven things you're supposed to have in any story, who did it?

You can say, 'A.I.G. paid the bonuses.' Excuse me, it's the compensation committee who authorized and paid the bonuses. And I'll be happy to give you their names.

We'd be happy to, too, Nell. And in fact, we will:

Company

Compensation Committee

AIG (NYSE: AIG  )

Dennis D. Dammerman

Harvey Golub 

Laurette T. Koellner 

Suzanne Nora Johnson

Bank of America (NYSE: BAC  )

William P. Boardman

Donald E. Powell

Thomas M. Ryan

Robert W. Scully

Citigroup (NYSE: C  )

C. Michael Armstrong

Alain J.P. Belda

Anne Mulcahy

Richard D. Parsons

William S. Thompson, Jr.

Goldman Sachs (NYSE: GS  )

John H. Bryan

Claes Dahlback

Stephen Friedman

William W. George

Rajat K. Gupta

James A. Johnson

Lois D. Juliber

Lakshmi N. Mittal

James J. Schiro

Ruth J. Simmons

Morgan Stanley (NYSE: MS  )

C. Robert Kidder

Erskine B. Bowles

Donald T. Nicolaisen

JPMorgan Chase (NYSE: JPM  )

Stephen B. Burke 

David C. Novak 

Lee R. Raymond

William C. Weldon

No one's saying these are all bad people who deserve to have eggs thrown at them. In some cases, the compensation committee only has jurisdiction over the top brass, while the payday of, say, a bond trader, falls outside their reach. And to be fair, being a board member can be a lucrative gig where their own behavior is influenced by cushy paychecks.

But Minow's point about giving names is an important one. It's far too easy, and far too common, for the board of directors to fly under the radar of criticism while both encouraging and enabling a clubby system that rewards bad decisions. It makes precisely no sense that so much criticism is (rightly) thrown at senior management, but almost none at the boards overseeing them. There has to be accountability -- personal accountability -- all the way down the ladder. 

Warren Buffett put it best when he said, "I've been on one compensation committee out of nineteen boards because these people aren't looking for Dobermans; they're looking for cocker spaniels. It's been a system that the CEO has dominated."

Every single company in the above table is alive today because of monumental government assistance. This isn't the time for cocker spaniels. Government-anointed pay czars, for better or worse, are ensuring the compensation dog keeps a fierce bark at some companies. But by and large, Wall Street's compensation system remains intact from years past. And not just intact, but more powerful than ever.

We can't say it enough, and its importance can't be sufficiently reiterated: Nothing has changed in banking. Step one to overcoming that is knowing the names of those who may have the power to change it -- even if it's just compensation reform, which is just a tiny sliver of what needs to be overhauled.

And, well, there you go.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (63)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 30, 2009, at 2:31 PM, catoismymotor wrote:

    + 1 Rec

  • Report this Comment On October 30, 2009, at 2:45 PM, TMFLomax wrote:

    Great work, and an excellent point, Morgan!

  • Report this Comment On October 30, 2009, at 2:49 PM, Starfirenv wrote:

    This has to be the Hall of Fame for the Walk of Shame! A poke in the eye,not only for every shareholder, but for every taxpayer. +1 rec

  • Report this Comment On October 30, 2009, at 2:56 PM, 123spot wrote:

    More of this. Now we're getting somewhere. Thank you Mr. Housel. And a special "hats off" to you, Ms. Minow.

  • Report this Comment On October 30, 2009, at 4:08 PM, Blakjak87 wrote:

    Villainizing JPM and GS is laughable. This would have been a good article had the author chosen not to lump them in with the riff raff of Wall Street. This is not an intelligent appliaction of guilt by association.

  • Report this Comment On October 30, 2009, at 4:33 PM, TMFDiogenes wrote:

    Why is that laughable? "Every single company in the above table is alive today because of monumental government assistance" is absolutely true. In March, GS had $182 billion in short term borrowings. Had the Feds not stepped in to ensure there was liquidity, they and everyone else relying on short term borrowing would have been done. The fact that they're making a mint off of a bailed-out financial system doesn't mean that they would have survived on their own had their debtors failed and there was no one left to buy their assets or give them $182 billion in a fix.

  • Report this Comment On October 30, 2009, at 4:44 PM, TMFDiogenes wrote:

    Also, all seven companies owe their survival to taxpayers, and, in GS's and JPM's cases, their current massive profits to bond trading -- that is, borrowing money from the Federal government at 0%-0.25% and investing it in areas where most of their competition was allowed to fail.

  • Report this Comment On October 31, 2009, at 10:36 PM, ishogun99 wrote:

    I disagree with the premice of the article. The problem is not the Wall Street, but the goverment. If they would allow wall street firms to fail, the discipline would be imposed. But now all we can do is to point fingers in different directions trying to find the guilty.

    Wall street will always make tons of money. The only remedy is unadulturated undistilled raw capitalism. Cutthroat competion and failure lurking behind every turn, that is the discipline that we need. And please keep the goverment occupied by trying to fix the post office.

  • Report this Comment On November 01, 2009, at 12:54 PM, 7351jay wrote:

    I have the view that these people (compensation committee ) should be what the Amish do: shun them.

    Pretend they are not there, just ignore there presence!

    It is a very effective way let them know their behavior is not approved.

  • Report this Comment On November 02, 2009, at 6:10 PM, NoFearNoWay wrote:

    Check that, these companies owe their existence to the stupidity of the tax payers. Last I checked it was not illegal to make a salary...but I do think "stupid" should be outlawed!!!

  • Report this Comment On November 04, 2009, at 11:37 AM, TMFBent wrote:

    I'm not sure a agree with the not throwing eggs part...

  • Report this Comment On November 04, 2009, at 11:58 AM, FleaBagger wrote:

    Gov't intervention, gov't pay czars: two wrongs don't make a right.

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