Posted on 10/17/2009 9:13:22 AM PDT by SeekAndFind
MUCH of the recent anger over bank bonuses has been focused on Goldman Sachs, which, according to results just published, accumulated a further $5.4 billion for its staff in the most recent quarter. Yet the one thing that can be said about Goldman is that if its employees are making hay partly on the back of an implicit public guarantee, so are shareholders. In the same quarter the bank generated an annualised return on equity of 21%. Not so for some of America’s other banks. There, the owners (and in theory the controllers) of the firms seem to have been forgotten, even though pay remains relatively high. About the only consistent beneficiaries of the new boom are employees.
Take Citigroup. During the latest quarter the firm’s common shareholders suffered a loss of $3.2 billion. Some of that reflected accounting quirks: a generous interpretation of “one-offs” would suggest a small underlying profit had in fact been made, but even then the bank still only generated an annualised return on equity of 2% for its shareholders. At Bank of America (BofA) common shareholders suffered a loss of $2.2 billion, and even adjusting for one-offs they still made a loss. Yet the banks paid out a combined $13.7 billion in compensation during the same quarter. Taken together, on an annualised basis, employees received the equivalent of 27% of the core equity in the firm, whereas shareholders got a return of zero.
Both firms would no doubt point out that compensation has fallen, that they are being less generous than competitors and that their staff would leave if pay were not maintained. And a big chunk of pay goes to normal employees, not masters of the universe. Still, in order of priority, firms should use profits to replenish inadequate capital, reward owners and only then to pay performance-related benefits to staff. Most business people would regard as insane the idea that to be competitive a firm should push itself into a loss, yet on Wall Street this defence is routine. Four of the worst banking blow-ups—Citi, BofA, UBS and Royal Bank of Scotland—remain among the top ten investment banks by fees and have not allowed their market shares to drop much. All four lost money in their most recent set of results.
Part of the solution may be regulation. For American banks in which the government still has investments, a “pay tsar” now exists. He took a tough stance with Ken Lewis, the outgoing boss of BofA, requiring him to accept no pay at all for this year. Amid all of this, though, shareholders remain oddly quiet. In America proposed laws will allow them a “say on pay”—an annual non-binding vote on compensation. Perhaps this will help. The biggest mystery is not why banks’ employees, underwritten by the state, want to earn more and expand, but why their owners, having been wiped out, accept such a dreadful deal.
Is this really true? Is there such high demand for financial services workers they can walk out the door and immediately secure an equally high-paying job elsewhere?
I sincerely doubt it, for all but the very highest performers.
It appears obvious to me that far too many corporations are being run in the interests of the executives rather than of the owners. This should be dealt with via a stockholder revolt, of course, not by regulation.
If companies were not bailed out, this would not be a big problem for too long.
Just another form of Employee theft. It doesn’t matter if those employees have titles like CEO, COO, or CTO.
I think we would see a much stronger financial sector start to emerge since all the failing dead weight would be gone. Given that most people in the USA did not even know that these companies existed, I don't think the impact outside of Wall Street would have been that bad. Now if Wal-Mart had collapsed... different story. Of course, we've had many big companies collapse in the past and surely enough the USA is still here.
The problem is by putting these companies on welfare for their poor business decisions, we encourage them to behave more recklessly and irresponsibly, since they know they will never have to risk financial ruin for their mistakes. We'd see even more welfare money go into the financial sector. Given enough time, it would become this age's version of Amtrak, only with a lot more money wasted.
Of course not. This is the same tired rationale that politicians and their supporters use to justify more perks and compensation. We have to pay more to get good people. The truth is, with very few specialized and talented exceptions, in this society and large capitalistic market, there is nearly always someone capable of doing your job for less compensation.
Probably better off. Incompetent and inefficient businesses would be gone and if the service they provided was something a free market needed or desired, others would have moved in to fill the void.
Yes, it’s true. The key people (the ones you hear about getting the 7 figure bonuses) don’t need an “equally high-paying job elsewhere”, or any job for that matter. If they’re not sufficiently incentivized with fat bonuses to stick around, they’ll leave and do whatever. Manage their own investment portfolios, hang out at their multimillion dollar estates, do a little consulting which they can usually get paid very well for due to their long list of connections to wealthy and powerful people. Even the ones just getting the mid-6 figure bonuses are generally quite capable of supporting themselves very well just day-trading for their own accounts. At home, in their jeans or pajamas. The corporate rat race isn’t a lot of fun, and sane people don’t stick around unless there’s a lot of money to be made.
I can tell you I would absolutely leave if they changed my compensation plan. In fact, in 2002 many of my peers walked out the door after our comp plan was changed. Why? Because a few thieves had submitted false sales contracts and were comp’d for doing nothing more than filling out fraudulent paper work.
Yes, any salesman can walk. A Real Salesman can sell for anyone and sell anything of value to a prospect.
A company has an obligation to pay for production to the Salesman and the support team.
If they are not willing to honor their commitment, a salesman will absolutely walk and go to a company that will pay them what they are worth.
What is a salesman worth? About 10% or more in total compensation.
So for 10% of $2 million in production a salesman would earn $200,000 or more for the year.
If he produced $50 million then he should be comp’d $5 million and more.
Don’t like it? Try working for a company that doesn’t sell anything.
Think you can do a better job for less? Feel free and tell me how you feel when you learn how much your contemporaries are earning.
Capable, yes. Willing, no. Not at the level where people are competent to handle day-to-day responsibility for billions of dollars. There aren't a huge number of people with the requisite intelligence, experience, and skills, and ALL of them have lots of options.
How long do you think it would take to replace you?
what in your opinion would be the effect if the government had done NOTHING and let every single dam one of them (Bear Sterns, Merril Lynch, Citigroup, AIG, GM, etc.) suffer the consequences of their irresponsible business decisions ?
Where would the USA be today ?
2 Trillion dollars less in Debt.
China less involved in our decision making
More than just one old jewish guy named Made-off in Prison
The dollar not falling like rain
Bonus for them, I know my industry and products very well. I also have very large client list that follows me because I perform and I am trusted adviser in helping them achieve their goals.
I was bringing in new business for my employer 2 minutes after I shook their hand. I don't need a ramp up period.
My former employer? Sales is an art and there a lot of things you need to know perform your job well. You need to understand your products and how it will help a client. You may even need to combine products to achieve several positive results.
You also need to have exceptional skills for understanding your clients needs and demonstrating how they can predictably achieve their goals.
The ramp at most companies is 6 months. So they lost current production and had to wait 6 months to 1 year to see if someone was going to produce.
The employer I went to work for got an over achieving salesman, well actually 4, and we took their sales to a whole new level.
We made it clear what we thought about getting paid and never had a problem.
It was a terrific opportunity for them and a win win for everyone.
I don't care how long it took to replace me.
Little secret about the best salespeople: We are hired mercenaries and so long as we paid and rewarded for being overachievers, everyone is happy.
Little secret about smart employers: They never lose anyone they don't want to lose. The minute you start thinking you are indispensable, you are fooling yourself. Salespeople are a dime a dozen. Even very good ones.
If you are a business owner then you would know the exceptional sales people are in fact not a dime a dozen, and replaceable, anymore than the best golfers can easily be replace.
There is a reason why compensation is accelerated for top performers and companies have Presidents/Chairmans Club.
Fact of the matter is we bring money into an organization. No sales = no money = bankruptcy.
You can fool yourself all you want and that is probably why you make the money you make and I make the money I make.
My previous employer lost 1 year of production when 4 of us walked on the same day and then 3 others in the following month.
That is a $20 million drop in revenue!
Guess those dime a dozen or commodity salesmen just weren’t up to snuff.
Oh, and you crack me up.
Forgot. When you lose $20 million in revenue some people who don’t sell or who use to support sales people are gonna get fired.
We also made it clear what the impact would be to their business and 11 other people were collecting unemployment within 90 days.
Dime a dozen, because what we do is a selfish enterprise and affects no one else.
And you still crack me up.
And you are right, smart employeers shouldn’t want to see an invaluable employee leave but, sometimes things happens and people lose their way.
We did not come to them as prima-donnas. We genuinely wanted to stay. I mean who in the hell wants to go somewhere else and work.
It was a great job but, me and my peers we got bills, we got families and we like to have some fun. But with no commissions, for worked performed they had essentially broken their promise, for whatever reason.
Unfortunately for the people who were let go after we left they spent some 90 days + looking for a job they didn’t have to lose.
They went from a nice salary to unemployment, which didn’t even come close to paying their bills.
We knew what the impact to us would be if we stayed but, we also knew what the impact to our divisions would be if we left.
We had no choice and the company had no answers as to when we might get paid.
Our money was only being held hostage until they could figure out who was committing fraud, which was only a couple of jerks.
So a lot of people paid for the sins of a few.
Bad situation for everyone.
If you and your buddies were such major league sales people and you are so smart, why were you working for such a goofball co?
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