Now John Mack, Morgan Stanley chairman, has undercut much of the banking industry’s attempts to justify big bonuses at a time of economic pain largely caused by the financial sector.
All through the current bank earnings season, banks have sought to defend bonuses by saying the ratio of compensation to overall revenues has been cut back. That might be true, but in absolute terms bonuses rose sharply on Wall Street while people were losing jobs on Main Street.
“I still don’t think the industry gets it,” Bloomberg reported the veteran banker as saying yesterday during an appearance in Charlotte, North Carolina (hat tip Huffington Post). “The issue is not structure, it is amount.”
Mr Mack himself has been a model of restraint for the industry on bonuses, which must be uncomfortable for many of his peers. He has not taken a bonus for three years and last year his basic pay salary was $800,000.
Mr Mack proposed an “open discussion” on compensation, attended by the major investment banks and regulators. “If we don’t do something, the government will do something,” he said, according to Bloomberg.
I suspect the rest of the banking industry executives would rather lose a limb or chew glass than take part in something like this.
Mr Mack’s comments come after a telling interview by the US executive pay czar Kenneth Feinberg on theHill.com (hap tip Dealbreaker.com). It is a compelling video, underlining Mr Feinberg’s view of chasm between Wall Street and the public on pay.
“It is very difficult to shake Wall Street into the reality of the anger,” he said. “I always expected Main Street and Wall Street would not be on the same page…same page? they are not even on the same universe.”
Mr Feinberg added: “It is not just about private schools and fast cars and mansions, it is also about compensation as an overall barometer of overall integrity and value as a human being. So it can get very emotional.”
Mr Feinberg reserves some of his scorn for an unnamed Wall Street executive.
“It is striking to me that when a Wall Street executive says you are only paying me $9m, why don’t you like me…” he said.
Mr Feinberg also told The Hill that the executives were not acting in bad faith. “They really do believe they are entitled to $9 million. That’s the problem,” he said.
I am sure it is pure coincidence that Lloyd Blankfein, Goldman Sachs chief executive, was awarded a $9m stock bonus for 2009.
Related reading:
Another day, another fit of bonus neurosis FT Alphaville
