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 |
Dennis D. Dammerman Harvey Golub Laurette T. Koellner Suzanne Nora Johnson |
|
Bank of America |
William P. Boardman Donald E. Powell Thomas M. Ryan Robert W. Scully |
|
Citigroup |
C. Michael Armstrong Alain J.P. Belda Anne Mulcahy Richard D. Parsons William S. Thompson, Jr. |
|
Goldman Sachs |
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 |
C. Robert Kidder Erskine B. Bowles Donald T. Nicolaisen |
|
JPMorgan Chase |
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.
