Wall Street bonuses

[The Progressive]

[quote name='WhiteQueen' post='1680475' date='Feb 9 2009, 13.04']They create [b]synergies [/b]between the companies[/quote]

An utterly useless and meaningless word. Financial types like to throw it around a lot, but I doubt if they even understand the context in which it's being used.

[quote]It is a hard work. Let's not make it sound simple. An investment banker knows a lot about a lot of things - he/she is a corporate financier, an accountant, an auditor, a legal/compliance advisor, a trader, a sales person, a marketing professional.[/quote]

I'm sure the job entails many long and tedious hours, just like almost everyone who're inclined to whine about their jobs could write a book about it if they have the time and energy ........... but for an industry that's thrive on performace-based pays, what happen when the advices/analysis given to clients, or the merger deals, turn out to be a stinking pile of legislative or financial crap ....... and the only people who benefited were the firm who were paid a shit load of money to broker the deal? What then? Are they gonna give the money back? Lol, I don't think so.

[ants]

Look, on the issue of CEOs etc. I've no doubt they're overpaid, and I've no doubt that the pay has been increasing too much.

But anyone for a moment arguing that a good CEO doesn't make a company 10x as much money, or a 100x as much as a regular worker needs their head examined. Although I'll concede too many ordinary CEO's are paid good CEO wages.

[The Progressive]

Good or bad, the American CEOs are way overpaid when compared to other industrialized countries. And I have no doubt that a Japanese CEO is just as capable or talented.

[Altherion]

[quote name='WhiteQueen' post='1680475' date='Feb 9 2009, 22.04']It is about supply and demand - if the demand for real estate in Manhattan is high, the prices go up, and only those who could afford it could live there.[/quote]
I know that. What I'm saying is that when this is taken to an extreme (as it is with Manhattan), it eventually drives out everyone but the very rich, their servants and the very poor. This doesn't make for a functional community.

[quote]It is a hard work. Let's not make it sound simple. An investment banker knows a lot about a lot of things - he/she is a corporate financier, an accountant, an auditor, a legal/compliance advisor, a trader, a sales person, a marketing professional. They don't sow, but they "sow" the companies together, they don't build, but they "build" new companies, and "demolish" the old ones. Where does this disrespect even come from?[/quote]
It comes from the fact that they (or a large enough fraction of them, anyway) have screwed up in an absurdly big way and have more or less dragged the economy of the whole world down with them. Aside: the latter should not even be possible, but it is because they've taken what they claim to be a free market and turned it into an oligarchy (things that are "too big to fail" simply should not be). The fact that they can fail thus leads me to believe that for all of their knowledge and all of their effort, what they're doing is glorified guesswork. That is, their actions (e.g. selling off a division that performed poorly for the last several quarters) lead to their goals (e.g. making the company more profitable) not 99% of the time, but more like 60% of the time and this number can be significantly lower if the situation is confusing. You are right about supply and demand -- people who can be right more often than not are valued, but I'm not convinced they're evaluated correctly.

[quote]He has enough already, he does not need to make more. Plus, he charges for his appearances - a lunch with Warren usually yields in 2 - 3 million dollars, he gets his cut, just from that. Warren is also not in the financial industry - he does not even hold a Series 7 license (which is General Securities Representative license - sort of an entry to the industry), he does not work for a broker/dealer. He is an investor, not an investment banker. He gives out $12 million a year to charities - why would he need a salary?[/quote]
This is true of the present, but as far as I can tell, his salary was always like this, even before he became legendary. In fact, it was initially $50K and at some point he adjusted it for inflation to $100K. Omaha is not Manhattan and $50K was a lot of money when he started, but it's not on the same scale as the officers of the big companies receive.

I don't understand what you mean by him not being in the financial industry. He does exactly the things you described, only he is either more skilled at them or luckier or both. That he doesn't have the credentials makes very little difference if the people who do have them go to him to learn.

[Altherion]

[quote name='ants' post='1680693' date='Feb 10 2009, 00.51']But anyone for a moment arguing that a good CEO doesn't make a company 10x as much money, or a 100x as much as a regular worker needs their head examined.[/quote]
Sometimes. And sometimes the same CEO can also lose 100x as much money for the company as any regular worker makes. What happens then?

[Guest Raidne]

[quote name='Altherion' post='1680791' date='Feb 9 2009, 20.34']Sometimes. And sometimes the same CEO can also lose 100x as much money for the company as any regular worker makes. What happens then?[/quote]

Depends. Did nearly every other comparable company make the same mistake? Then apparently you can blame it on market conditions and not the bogus securities that you all bought.

And I'm still surprised the ratings agencies aren't getting sued within an inch of their life.

In my personal opinion, CEOs should get pretty standard salaries, strictly performance based bonuses granted at different levels for meeting predetermined goals, and whatever stock options the rest of the employees get. That's it.

But, you know, it's up to the company, or it is at companies that didn't accept bail out funds. Personally, I'm all for some corporate compensation regulation setting limits on what kind of securities can be given to executives (as some provide incentives to skirt, if not break, the law, not to mention the prohibition on self-dealing) in theory, but in practice I'm not sure they wouldn't mess it up as much as they did with SarbOx.

[WhiteQueen]

Okay, people, I just got my ass back home, tired, overworked, unhappy. My last post in this thread, OK? I really have nothing else to add, except there are a lot of executives that made Wall Street look bad (and not just executives to be perfectly honest), it is not a happy place to be right now. Yet, as much as I am angry at the same John Thain (I used to work for him for two long years and argue with him at least once a week), I find myself defending him and his lifestyle. Why? THe guy made us all look bad. Well, partly, because of the whole "Wall Street" generalization. To see people surrounding the New York Stock Exchange, waving the slogans, armed security guards next to them, hearing angry chanting in the middle of the day, being stopped by reporters who want you to further compromise the industry by chatting with them - basically, it feels like you are an enemy of the state just by the virtue of you being employed in the financial industry. Media blew the story out of proportion - it embarrasses me to read how much so and so spends and how much so and so makes, it's like going through someone's dirty laundry and it's in poor taste. I also don't like how retroactive the criticism is - why was it not brought up to the taxpayers attention prior to the bailout? An executive did not alter his lavish lifestyle after receiving his bonus - he leads exactly the same lifestyle as before - only if yesterday he was a hero and a savior (John Thain was credited with saving the Big Board - saving from what? From the specialists? From Dick Grasso? and with saving Merrill Lynch from bancruptcy), today he is an ultimate villain and a crook. Yet, what he did is a common practice - after 9/11 executives received bonuses for getting the market up and running only a few days after the tragedy, last year Mary Schapiro - a new head of the SEC was awarded a multimillion dollar bonus for merging NYSE regulation and NASD into FINRA - and FINRA is a non-for-profit! Yet, she is not criticized but nominated as the head of the SEC and the execs are hammered. Granted they deserve the criticism and yet why was their dirty laundry not exposed when they made political donations, paid taxes (1/5 of NYC revenues comes from the financial sector) or during good years, when the same press called them financial wizards? Economy is cyclical, things would turn around, hopefully soon and new heroes and villains would emerge, but currently it hits the nerve to see how everyone happily falls under the spell of stereotypes.

[Week]

I guess the paragraph is just another thing that is a myth on Wall St, in addition to frugality.

[SquireThomas]

[quote]Got to say, watching IQ is very funny. I'm 95% sure she's making fun and laughing her arse off.[/quote]

No way. Remember the Au Pair thread? Or the Call Girl one? I guess you can choose to believe that QC is the most dedicated troll in history, but I'm thinking no.

[quote]If the company, which we taxpayers now own, is going to return to profitability, it's going to have to carry on with its ordinary business. Like it or not, that business rewards successful salespeople in ways that appliance repair doesn't. The same point goes for financial compensation generally—the 2008 bonuses that the president has declared "shameful" and the salaries that he is attempting to cap for recipients of federal help.[/quote]

See, I've seen this "point" made several times, which doesn't seem that true at all. The executives of several large investment banks were spending the last few years running their companies and our economy into the ground: and for this they got huge bonuses! Pay (at least once you move up the food chain a little) barely seems to be connected with the quality of your work at all: more like for showing up. That you can fail so spectacularly yet still be massively paid just seems unreal to me, and true for no other industry. It'd be like if somebody brought a car into my garage, but instead of fixing it, I smashed in all the windows with a sledgehammer. Back in reality, I'd be fired, and probably sued, but in the WallStreetVerse, I'd be payed $5,000,000 before I "resigned."

[quote]Okay, people, I just got my ass back home, tired, overworked, unhappy. My last post in this thread, OK? I really have nothing else to add, except there are a lot of executives that made Wall Street look bad (and not just executives to be perfectly honest), it is not a happy place to be right now. Yet, as much as I am angry at the same John Thain (I used to work for him for two long years and argue with him at least once a week), I find myself defending him and his lifestyle. Why? THe guy made us all look bad. Well, partly, because of the whole "Wall Street" generalization. To see people surrounding the New York Stock Exchange, waving the slogans, armed security guards next to them, hearing angry chanting in the middle of the day, being stopped by reporters who want you to further compromise the industry by chatting with them - basically, it feels like you are an enemy of the state just by the virtue of you being employed in the financial industry. Media blew the story out of proportion - it embarrasses me to read how much so and so spends and how much so and so makes, it's like going through someone's dirty laundry and it's in poor taste. I also don't like how retroactive the criticism is - why was it not brought up to the taxpayers attention prior to the bailout? An executive did not alter his lavish lifestyle after receiving his bonus - he leads exactly the same lifestyle as before - only if yesterday he was a hero and a savior (John Thain was credited with saving the Big Board - saving from what? From the specialists? From Dick Grasso? and with saving Merrill Lynch from bancruptcy), today he is an ultimate villain and a crook. Yet, what he did is a common practice - after 9/11 executives received bonuses for getting the market up and running only a few days after the tragedy, last year Mary Schapiro - a new head of the SEC was awarded a multimillion dollar bonus for merging NYSE regulation and NASD into FINRA - and FINRA is a non-for-profit! Yet, she is not criticized but nominated as the head of the SEC and the execs are hammered. Granted they deserve the criticism and yet why was their dirty laundry not exposed when they made political donations, paid taxes (1/5 of NYC revenues comes from the financial sector) or during good years, when the same press called them financial wizards? Economy is cyclical, things would turn around, hopefully soon and new heroes and villains would emerge, but currently it hits the nerve to see how everyone happily falls under the spell of stereotypes.[/quote]

I think I hear music playing in the distance! Is that....a violin? I don't think anyone is falling under the spell of anything, so much as being repulsed by the bottomless greed that has apparently engulfed the financial industry. Every last person in this thread, from a board filled with people of all races and economic stations, has reacted to your posts with something ranging from astonishment to revulsion. Are you really going to chalk it up to "stereotypes"?

[Stubby]

[MOD]For the second time in this thread it is necessary to mention the need to keep personal attacks out of argument.

For the sake of those who would like to continue with the debate, please refrain from doing so.[MOD/]

[gryphon strike]

I am almost on IQ's side here, not about the CEO's but about the average workers in the financial industry. So how about instead of giving the idiots who broke every financial rule in the book with millions how about we split it up and give that money to the people at the bottom of the financial sector. You know the poor hard working ones who come up with good ideas only to have them stolen by the next person up the feeding chain, who in turn has it stolen from them etc.

IQ one thing I really do have to nitpick with you though. You do realise don't you that the vast majority of shareholder votes are given as proxy to the chairman of the board don't you?
I find myself wondering when was the last time a small shareholder say 1,000 shares was actually allowed into a stockholders meeting?

The main reason that people are angry and disgusted is that the CEO's and executives engaged in what can only be regarded as criminally fraudulent behaviour and not only have they not been charged with the crime but they are still getting bonuses after such behaviour became public knowledge.
Sorry IQ but many of these people should currently be in jail not going to charity balls sorry lets call them what they are networking balls.
Granted the media has gone overboard but I have to ask just what it will take to wake the industry up?

[Angalin]

[quote name='SquireThomas' post='1680993' date='Feb 9 2009, 23.23']Remember the Au Pair thread?[/quote]
As you bring it up, let me point out that lots of people use au pairs or nannies to care for their children. Lots of people use daycares too. Parents use the kind of childcare that (a) seems best to them (b) that works with their schedules ( c) that they can afford. Criticizing someone for using a form of childcare that you don't agree with when you aren't the one weighing out the options is not, IMO, helpful at all.

[quote]Pay (at least once you move up the food chain a little) barely seems to be connected with the quality of your work at all: more like for showing up. That you can fail so spectacularly yet still be massively paid just seems unreal to me, and true for no other industry.[/quote]
Both Iskaral and naz have made the point that the compensation system is broken. There's no point in blaming those who earn a living from it yet can't change it. If the US government had wanted accountability on the bailout money - a bailout which, as I recall, QC opposed from the beginning as a disaster in the making - it should have been written into the deal.

Blowing my patriotic horn a little, Fareed Zakaria has a good [url="http://www.newsweek.com/id/183670"]column in Newsweek[/url] where he points out that Canada "alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors." While he pays credit to tight banking regulations, he also cites government policies such as not having tax-deductible mortgage interest as having played a key role. That said, the Canadian government is taking the country back into deficit territory with its own stimulus package, which includes such gems as building more research labs while cutting research funding. :rolleyes: Nothing like a political crisis to get the money wheel spinning in all directions!

[Angalin]

Thinking about bonuses and salary levels in general, it seems that businesses would [url="http://blog.macleans.ca/2009/02/02/take-a-pay-cut-to-save-jobs-no-thanks/"]rather cut jobs[/url] than cut pay packets:
[quote]The human resources firm Watson Wyatt recently surveyed U.S. businesses and found just six per cent are planning pay cuts, whereas close to 34 per cent expect to slash jobs this year.
...

The answers to this riddle can be found in a little-known 1999 book by Yale University economist Truman Bewley, fittingly titled Why Wages Don’t Fall During Recessions. The author interviewed more than 300 executives, union leaders, recruiters and HR experts in an attempt to unravel the mystery of why companies consistently opt for the expensive and complicated exercise of severing workers, rather than negotiating lower salaries.[/quote]
Why? Not because of the unions, but because companies look at the effect on morale.
[quote]When workers are fired, it generally sends a wave of discontent through the ranks. But then the affected employees are gone, and after a few weeks, things return more-or-less to normal. In contrast, when wages are cut, bad feelings linger in the office for months as employees grumble and debate whether they’ve been mistreated by management, and when they’ll get their “real” full paycheque back. Strange as it may seem, employers believe it’s actually less disruptive to simply fire people.
...

Ruthless though it may be, studies indicate that staff work harder when they feel their jobs are at risk. Nothing focuses the mind quite like seeing the guy in the next cubicle get handed a severance cheque.[/quote]
Ain't that the truth. :(

[ThinkerX]

Oddly enough, the nutjobs are also mulling this one over. So far they seem less than impressed:

[url="http://www.doomers.us/forum2/index.php?PHPSESSID=afda24eb6ce3dd9c586573779d824328&topic=38086.0"]http://www.doomers.us/forum2/index.php?PHP...p;topic=38086.0[/url]

[gryphon strike]

[quote name='Angalin' post='1681074' date='Feb 10 2009, 18.02']As you bring it up, let me point out that lots of people use au pairs or nannies to care for their children. Lots of people use daycares too. Parents use the kind of childcare that (a) seems best to them (b) that works with their schedules ( c) that they can afford. Criticizing someone for using a form of childcare that you don't agree with when you aren't the one weighing out the options is not, IMO, helpful at all.


Both Iskaral and naz have made the point that the compensation system is broken. There's no point in blaming those who earn a living from it yet can't change it. If the US government had wanted accountability on the bailout money - a bailout which, as I recall, QC opposed from the beginning as a disaster in the making - it should have been written into the deal.

Blowing my patriotic horn a little, Fareed Zakaria has a good [url="http://www.newsweek.com/id/183670"]column in Newsweek[/url] where he points out that Canada "alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors." While he pays credit to tight banking regulations, he also cites government policies such as not having tax-deductible mortgage interest as having played a key role. That said, the Canadian government is taking the country back into deficit territory with its own stimulus package, which includes such gems as building more research labs while cutting research funding. :rolleyes: Nothing like a political crisis to get the money wheel spinning in all directions![/quote]
Care to name a bank in Australia that has failed due to this disaster?
Yes there may have been some mergers but those were already underway before the shit hit the fan.

[ants]

[quote name='Altherion' post='1680791' date='Feb 10 2009, 12.34']Sometimes. And sometimes the same CEO can also lose 100x as much money for the company as any regular worker makes. What happens then?[/quote]
I would argue that if something like that happened because of the CEO, they obviously weren't a good one!
[quote name='gryphon strike' post='1681167' date='Feb 10 2009, 21.24']Care to name a bank in Australia that has failed due to this disaster?
Yes there may have been some mergers but those were already underway before the shit hit the fan.[/quote]
From what I know in the work I did with them before I left Australia (over 12 months ago), I'm staggered the big ones are having any issues whatsoever. Generally my perception was they were over reserved, no sub-prime issue in Australia, and (reputedly) little exposure to the US mortgage assets that stuffed many European banks. But then, I have heard on the grape vine that a few of them are almightily pissed at the valuations they're getting from the valuation houses that lump them in with non-Australian banks.

But then, we have a very tight risk and regulatory regime.
[quote name='SquireThomas' post='1680993' date='Feb 10 2009, 16.23']No way. Remember the Au Pair thread? Or the Call Girl one? I guess you can choose to believe that QC is the most dedicated troll in history, but I'm thinking no.[/quote]
Well, I'm not sure. But if I assume she's having fun, I find it funny, so I'll keep doing it.
[quote name='SquireThomas' post='1680993' date='Feb 10 2009, 16.23']See, I've seen this "point" made several times, which doesn't seem that true at all. The executives of several large investment banks were spending the last few years running their companies and our economy into the ground: and for this they got huge bonuses! Pay (at least once you move up the food chain a little) barely seems to be connected with the quality of your work at all: more like for showing up. That you can fail so spectacularly yet still be massively paid just seems unreal to me, and true for no other industry. It'd be like if somebody brought a car into my garage, but instead of fixing it, I smashed in all the windows with a sledgehammer. Back in reality, I'd be fired, and probably sued, but in the WallStreetVerse, I'd be payed $5,000,000 before I "resigned."[/quote]
I don't think anyone here has defended the bonuses of the top executives still being paid, or that the incentives system isn't broke. The people arguing for the bonuses/excec are arguing either:

a) That a $500,000 salary is too low (IQ)
b) That the lower level executives of some divisions and lower level staff, should possibly still get bonuses (several). Or in my case, I've argued where a company owned by the parent company does well.

Not for the higher level execs/CEOs, or those directly responsible.

Oh, and I think that in addition to the incentives scheme, we need a long hard look at the ratings industry as well. If they hadn't screwed up, a lot of this mightn't have happened, even with the screwy incentive systems.

[OsRavan]

Ok I had to respond to this thread.

I was born and raised in NYC. And my family still lives there. And im a product of their public school system.

First off 1) Its not child abuse to send your kid to nyc public schools. Thats offensive. I loved my public school. In fact if anything I would say its child abuse to send your kid to a private school.

I went to a nyc public school and am currently a graduate student. Most of my peers in my public school have college degrees.


Secondly) I want my 1,000 dollar check. Im from brooklyn and i always said "NYC"* So does everyone else i ever met from brooklyn or the bronx. We call ourselves NYC and only use brooklyn in the same places you would use "Manhattan"

Which is as it should be. Much as I make fun of staten island... truth is all 5 boroughs are part of the city. and its offensive of you to imply otherwise. Legally we are NYC. Culturally we are NYC. In how we think of ourselves we are NYC. And I find it wrong for you to imply otherwise.

In fact i consider myself more of a new yorker then you are probably. As in im a third generation living in that city. I was born and raised there, my parents were born and raised there, and my grandparents were born and raised there. I doubt you could say the same. None of us live in rent control... and we still live there.


Thirdly) I know TONS of people who live o n 50k or less.. hell 30k or less.. inthe city. And by city I mean both brooklyn/bronx AND Manhattan. I worked for years at the union square barnes and nobles. And I was the only one on my floor who didnt live in Manhattan. And btw they make like under 30k







* edit to add: Technically we actually say "new york" but thats because people in nyc tend not to add the city on, we forget there is a ny outside the city. But when we say "New York" we mean the city.

[Frosty]

I am brought to the firm conviction that this is one of the worst threads ever posted in General Chatter/Misc. Talk about character assassination at its finest. Broadbrushing, generalization and outright slander.

[naz]

Os' first post back and he comes roaring out of the gate on my side of the argument. Who could've asked for more than that? :)

[Galactus]

Hey, i was the one who told him about the thread. (Since it was about New York and all I figured he'd be interested...)