Bonus War: Wall Street vs. Main Street
Main Street America – not to mention Pennsylvania Avenue – doesn’t understand how executives and traders and brokers (oh my!) can get “rewarded” for performance during a year when their financial companies were requiring massive government bailouts to stay afloat and keep the entire system from crashing. Wall Street’s Masters of the Universe don’t understand why their critics don’t realize that their compensation is based on a “low base” with high rewards for driving profits in their area of responsibility, regardless how the company as a whole is doing.
Both sides have a point, but for the first time in a couple decades, Wall Street denizens are going to lose this one. The “eat what you kill” compensation system has been in place so long, it’s become an “entitlement.” The majority of Wall Street bankers are under 45 and this is the only world they’ve ever known. They consider their base pay “a joke” – even though the average Wall Street base is considerably higher than the average American’s all-in salary. Several young bankers have been quoted the past couple days deriding the recently received 2008 bonus payments with descriptions such as: “I feel like I got a doorman’s tip, compared to what I got in previous years.” At the possibility of not getting a bonus this time around, I heard one sentiment that went something like this: “If there’s no bonus, then I put in all those hours last year for nothing.” Again, “nothing” is defined as approximately $200,000.
It’s going to be a fascinating culture clash. A generation of bankers and execs accustomed to high pay, high rewards and luxurious perks squaring off against a White House, a Congress and millions of taxpayers who are deeply worried about the future and mightily p***ed off about the past. Interestingly there are thousands of executives (and former execs) who share the worry and the anger. Some call these folks HENRY’s (high earner, not rich yet.) These are folks who have worked hard, climbed the corporate ladder, paid their dues and only get bonuses when their company has a good year, and only if they have had one too. Most of these folks have watched their bonus payments shrink or vanish in the past year or two; have had their base comp frozen or cut, are doing more work than a year ago because of headcount reductions around them; and have watched their benefits shrivel as their company cuts back on health care and 401k support. And speaking of 401k’s, they ain’t what they used to be either thanks in large part to the aforementioned collapse of the financial system.
So here’s the question for career execs like us: are we going to become collateral damage in the emerging class war in America? Are we going to get dragged (or thrown) under the bus with the Wall Street entitlement addicts whose firms caused this crisis in the first place? I don’t know about you, but I’m going to try to stand away from the curb and look both ways before crossing. It’s going to be a bumpy ride for all of us.