On June 10, the Obama Administration appointed Kenneth Feinberg
“Compensation Czar.” According to today's The New York Times, Mr. Feinberg is about to review how compensation should be structured for senior executives, or high earning executives, at the Financial Services firms that received federal bailout funds. At issue, apparently, are the guaranteed bonuses that certain executives are scheduled to receive at some point in the future, based upon the agreements that they reached when they joined their new firm.
These TARP recipients are subject to the government's scrutiny because they spent humongous amounts of taxpayer money to keep these firms from going under. I get that, and I'm a taxpayer too. But I'm a headhunter too, and the headhunter in me KNOWS that the more you talk about government approval of compensation, the more that top revenue producers (i.e. the ones who get these big bonuses) will NOT want to work for these companies. They will go to work for the few that repaid TARP, or for the smaller, or foreign based banks, all of whom are not subject to the same Government oversight.
By definition, weaker companies MUST pay MORE to “A” players to get them to play for their “B” team. Mr. Feinberg's efforts to assuage taxpayer anger will only serve to drive the best performers, who are also the highest paid, right into the arms of their stronger competitors. The Banks that are supposedly “too big to fail” will continue to struggle to retain and attract talent. Their downward spiral will accelerate and taxpayers will lose their initial investment and be on the hook for a lot more.
As long as the marketplace defines compensation, we cannot artificially impose regulation for a select few and expect them to compete effectively with companies that are unfettered.
