The Wall St. Bonus Debacle

Starting off the day with some humor, albeit humor with a point:

Don’t get me wrong if you have an employee who is primarily paid by commission and has done his/her part to bring in profits for the company, works in a profitable division, etc, I’m not THAT upset if they receive their commissions, bonuses for meeting a sales plan, etc. Even if the company in question is in trouble, there is nothing wrong with compensating the people who are doing their part to help the company survive. However you need to use common sense and reason in these situations, and there is a big difference between paying bonuses when you’ve had a bad quarter or three and paying bonuses when you’re on the verge of bankruptcy.

Companies that need support from the government in order to continue to operate have no business paying bonuses; and the “retention” argument doesn’t work during an era when many banks are laying people off and the entire sector is struggling mightily. Banks claiming that they need to pay bonuses in order to retain top employees, is analogous to Chrysler saying that they need to pay retention bonuses to factory workers in order to keep them from jumping ship and going to General Motors (GM).

The other issue here is that considering how angry the general public is at Wall St and the glee with which some politicians are attacking various companies, banks need to be mindful of the public perception of their actions. Because not only can bad PR be bad for business in general, but it can lead to politicians pushing companies to make decisions (the lending volume vs. TARP funds argument) that aren’t necessarily good for business, or the economy for that matter.

Moving forward the banks need to not only think in terms of what’s best for business, but they need to think in terms of what’s best politically and public perception wise.

Disclosure: at the time of publishing the author didn’t own a position in any of the companies mentioned in this article; the ideas expressed are solely the opinions of the author and shouldn’t be viewed as financial or investment advice.

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