This has to be the most outrageous business story of the year and it’s up against a lot of stiff competition. And let me say, until now I didn’t think there was much of a problem with executive pay, but I now think I was wrong, especially when it comes to financial institutions.
When it comes to the “You’ve gotta be kidding” business stories of the year, you have to think about the following:
In simple terms, their top 30 people will not get cash bonuses but will instead be paid by shares. And as an added measure these shares have to be kept for five years.
Five years is a good time frame as it stops smart alec’s creating dodgy business products, such as credit default swaps that can’t be honoured, that can then blow up and cripple a business, a financial system and a global economy!
Also over five years shares should head up, if history is any guide, and so these executives will make a bomb as they help grow Goldman Sachs.
This, of course, is not the outrageous business story of the year but a related one is, at least by my reckoning.
Bob Pisani speaking on CNBC made the point that this won’t please the critics of finance companies and their outrageous bonuses.
Greater control required
Well, try this on for size and ask yourself if this is for real.
Pisani explained that Goldman has 31,000 executives up for a bonus and the average is, wait for it, $700,000! I will write that again — $700,000!
I know I can over-use exclamation marks but this time it’s spot on. The average pay for a Yank is $40,000 and given the fact that the US taxpayer bailed out Wall Street firms, you can understand why there is a big focus on bankers’ bonuses.
All of us know that bankers are paid too much but there’s a global standard that emanated out of the US and it gave birth to the defence: “If you pay peanuts you get monkeys!”
However, we paid the banking boys wads of dollars and pounds and they made the catastrophic money mistakes that caused the GFC, the credit crunch, job losses and a global economy that will be fighting recession threats for a couple of years.
Top executives deserve big pay but not outrageously big pay. It’s time that people with good sense took control.
Real world comeback
Try this as a thought: one of the great problems we have now is the availability of funds. Banks are warning that overseas funding is drying up as governments compete with business and consumers for savings.
Those Goldman bonuses add up to about $20 billion and if we looked at the bonuses all of the big banks will pay this year and put them out into the securitisation market then the supply of loanable funds would increase and help KO an emerging problem.
That’s just one idea that sounds a whole lot better than paying 31,000 bankers an average bonus of $700,000. Anyone who disagrees with me is either a banker or has been living in La La Land for too long.
It was La La Land thinking that got us into this mess. It’s time for the real world to make a comeback. Go the real world!
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