07 October 2009

Freeland: Banking Goes Broadway

Pay Pals: Getting Big Bucks from Banks
By Bill Freeland / The Rag Blog / October 7, 2009

As MegaBank’s CFO, I’ve prepared the following guidelines for the upcoming meeting of the executive compensation committee.

(I say “upcoming” but, of course, I mean “long past.” It seems notice of this year’s meeting was once again sent late and as a result none of you were here. Don’t be concerned. It went off without a hitch. Simply sign below to confirm receipt of this back-dated mandatory communication.)

Item 1: Hello and Goodbye

First, let me welcome all of the newcomers -- which is to say, all of you. As you are aware, committee members are replaced annually to promote the bank’s goal of presenting policies that are always fresh -- at least to each of you.

The benefit in all of this is that there is little need for you to be concerned about details you’re likely to forget by the end of the meeting anyway. We apologize in advance if the new amenity we’ve added to the gathering creates a distraction. As I’m sure you know, access to an open bar during all the deliberations has recently become a widely accepted practice in our industry. What’s more, should you have any other needs that require attention (either here or in an adjoining room), feel free to consult the friendly companion who has been assigned to you for that purpose.

Item 2. Newly Strengthened Standards

In light of the recent financial crisis (or as we prefer to call it, “opportunity”), the time of business as usual is long past. Time was when hard work and political connections were all you needed to succeed in this business. Not anymore. Today we have a new partner: the federal government. As a result we are now free to move beyond merely rewarding success. In this new age we can concentrate exclusively on the rewards themselves.

Which means that the work of this committee can assume a sharply different focus. Having become really too big to fail also means we are now big enough to accept the rewards of this new status. Which is why this year’s bonus package, while it may appear exorbitant to others who have not achieved our level of systemic threat, we believe is simply too big to forego.

Item 3: Short-Term vs. Long Term Goals

If there is one thing this new realty has taught us it is that we need to focus more on long-term stability rather than short-term gain. This will require raising our sights above today’s quick profit and becoming more concerned with projecting earnings much further out. Say, a month or two -- at least. In this context, we hereby dedicate ourselves to the long-term goal of a minimum of two booms before every bust.

But this kind if discipline comes at a price. Which, of course, brings us again to the compensation committee. Long-term perspective merits long-term pay. Therefore, we will be proposing the industry’s first “better than life” lifetime pay. The checks keep coming as long as we (or our beneficiaries) keep cashing them.

Item 4. New Levels of Accountability

We have all grown up to respect the importance of the work ethic. In recent years that has meant the grinding demands of working from ten to four for a solid three days a week with only a two-hour break for lunch. But in this new age of bailouts and corporate consolidations, we call for a new definition of the term “work” itself. Who anymore really believes that this requires time actually spent at a desk. Or for that matter, even at the office.

No, work can now assume a new existential dimension. Now the new definition of “executive performance” can be inextricably joined to “executive existence” itself. We no longer merely do our jobs. We are our jobs. Recognizing this new reality, however, presents a unique challenge to the compensation committee.

Existence obviously requires a 24-hour commitment. And as a “24-hour executive,” our compensation must be similarly comprehensive. We exist around the clock. We should be paid around the clock. Seen from this perspective, executive pay that was once considered outrageous is now merely au currant.

And given what we’ve been through over these last months, that seems the least we can do for ourselves.

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