Opinion

Felix Salmon

Does Feinberg want to control bankers’ pay or not?

By Felix Salmon
January 7, 2010

In the wake of that massive Steve Brill profile, Ken Feinberg is now appearing on Bloomberg TV, and saying something very odd indeed:

Feinberg said his “biggest accomplishment” as pay special master is Citigroup and Bank of America’s repayment of U.S. aid.

“I find that to be the primary objective, and we achieved it,” he said.

The way this whole thing worked, of course, is that Citi and BofA were forced to get Feinberg’s approval for their executive-pay schemes — until they repaid the direct US aid. This was perceived to be a problem, especially at BofA, which was trying to hire a new CEO at the time, and so the banks moved heaven and earth to make those repayments, no matter how much they cost the bank and its shareholders, and no matter how much systemic risk was increased as a result. (After all, both banks are still too big to fail, which means they’re both still operating under an implicit government guarantee.)

It’s weird that Feinberg considers the repayment of aid to be his biggest accomplishment, because the day that repayment happened, he lost all control over executive pay on Wall Street — and he’s telling Bloomberg in the same interview that he wishes he had more control over that, rather than none at all.

Feinberg, it seems to me, can’t have it both ways. Either he wants control over pay, or he doesn’t. If he does want control over pay, he shouldn’t be encouraging banks to wriggle out from under his purview. If he doesn’t, then he shouldn’t be disappointed that his jurisdiction was so narrow.

Comments
2 comments so far | RSS Comments RSS

talk about the law of unintended consequences.. wasn’t the whole mission of the pay czar to align the interests of the management with those the shareholders and the taxpayer (and limit systematic risk, like you said)? In classic Ponzi style, the TARP is now paid back, but the banks are free to resume the risk taking that put them in that spot in the first place. rinse, repeat.

Posted by KidDynamite | Report as abusive
 

The whole thing about executive pay deserves its own place in a series of reforms that are badly needed in corporate America, not just in finance or banking industry. Here’s a refreshing ranking of best-performing CEOs worldwide from Harvard Business Review (I heard it on NPR): http://hbr.org/2010/01/the-best-performi ng-ceos-in-the-world/ar/1

If I could have my may, I’d measure companies (public ones) not just by quarterly or annual financial result, but by a whole new sets of measures including:
- R&D investment
- annual return on equity (not just P/E ratio) but going back 5, 10, 15 years
- number of jobs created/lost at local/state/national level
- executive pay packages and how they stack up against median pay at the company
- environmental impact on communities it operates in …

The way Wall Street has been evaluating companies based on narrow, short-term quarterly results is monstrous and disastrous, for companies, their employees, and Wall Street itself. It’s high time we think out of the box.

Posted by jian1312 | Report as abusive
 

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