So much for the "talent drain"

You've probably heard over and over how big banks have to throw tons of money at executives to keep them from going to the competition. Well, the government's compensation guru says the reality is different.

Kenneth Feinberg is expected to release his findings today as he announces the 2010 pay packages for the top executives at GM, AIG and other companies still under the government's watch. A preview from the New York Times:

Of the 104 senior executives whose pay was set by the federal pay regulator in the last two years, 88 executives, or nearly 85 percent, are still with the companies even though their pay was drastically cut back, according to people briefed on the government data.

The relative stability, at least within the executive suite, suggests that a soft job market, corporate loyalty and personal pride helped deter the feared management exodus at the companies hardest hit by the pay rules.

Feinberg is also sending a letter to all 419 companies that received money from TARP. Although he can't enforce pay limits at banks like Goldman Sachs, he is asking for the bonus numbers from late 2008, right after TARP saved these financial firms. From ABC News:

While Feinberg has no power to set pay at these 419 companies, he could expose companies for paying out lavish sums of money as the firms took taxpayer aid in the wake of the financial meltdown. The "name and shame" strategy could ultimately result in firms returning bonuses or salaries.

Wall Street has already changed some of its pay structures -- for example, giving more compensation in the form of stock. But a recent Harvard study suggests that executives with lots of stock just cash out before the ship sinks:

The conventional wisdom is that Wall Street executives who are paid in stock lose out when their firm's suffer. But as the Harvard study points out, the top executives at Bear and Lehman were able to collect more money during the good years than they lost when their firms ran into trouble.

And as much as Feinberg might think a strict pay policy will make a difference, it's all in the execution of such a strategy. The recent report on the Lehman Brothers collapse said Lehman had all kinds of policies that theoretically tied compensation to long-term performance.

They just weren't enforced.

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If Wall Street oligarchs, traders and banksters generally are so talented why did they cause the Great Recession? Seems that their talent lies in bribing elected officials to print money to pay for their losses so they can resume paying themselves tens of billions of dollars in compensation while we end up paying higher taxes.

Obama has the legal authority to declare any citizen an "enemy combatant" and waive their constituional and human rights. He could just tell the banksters to accept the average American income until the country is back to four percent unemployment or be rewarded with an all expense paid Caribbean water boarding vacation.

Anon, while I share the same disgust with Wall Street I dont think that declaring these folks as "“enemy combatants” will be too productive. I would just prefer an online "Wall of Shame" for bad executives. It baffles me how some of these guys manage to keep their jobs and even move on to other posts after they have clearly demonstrated their inability to perform. We really need to dispel this myth that high level executives are a rare breed that only come from ivy league schools and networks of high society (look at how we describe them! 'high society'???)

As far as trying to get the U.S. back to four percent unemployment, I dont think that would be a good thing either. That would be quite inflationary. 5.5 to 6 percent would be much better and quite healthy.

The oligarchs, financial industry indeed nearly all of corporatist America have done astoundingly well by themselves at Main Street's expense. Our government is covering their losses and those of their unsecured creditiors. Your remark about shame would be a joke to them. It assumes the ideology of "free market" capitalism and the farrago of assumption that go with it, e.g., efficiency and equity in the distribution of society's burdens and benefits. But your observation about the myth of the exceptional abilities of high level executives shows that you realize we have a free market of social connections not a free market open to ability and talent. As numerous commentators have pointed out over the decades, America morphed into managerial capitalism in which the managers are accountable to no one certainly not shareholders (the nominal owners of capital).

A four percent employment rate is even less inflationary than it was in the 1990s because the savings rate must increase, home equity can no longer be used to support consumption.

Beyond whether people left or not... How does this reflect on leadership ? If I was a leader in an organization and was on the watch when the leadership team drove the company to verge on insolvency, I cannot imagine expecting a bonus, whether it was contractually guaranteed or not. Keeping leaders like this on the team is the type of leadership WE DO NOT NEED. Suck it up, and be a responsible leader.

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