Shortly after last year’s bonus round I was having lunch with the boss of an investment firm. He told me how he heard a handful of staff had been grumbling about what, by most people’s standards, were still extraordinary pay packages. He called them into his office and told them that, since they were unhappy, they should “Just Go”.
Most of them packed their things and left the firm. But the next day one came back and said he had been misunderstood. My interlocutor said he hadn’t misunderstood him at all. The employee clearly felt he was worth more than he was paid. He should take his luck and go elsewhere as he clearly didn’t have his heart in his current job. He should “Just Go”. And he duly did.
These words “Just Go” stuck in my mind because financial services bosses use them far too rarely. My lunch companion was perhaps an exception because his family is a big shareholder in his firm. Most other bosses are stewards for shareholders – and normally not terribly good stewards at that.
Of course, banking and investment bosses do have some equity in their firms but typically they don’t act like owners. They want to get paid a huge amount themselves. They also want to be surrounded by a phalanx of fawning minions who tell them they are masters of the universe. That boosts their egos. The best way of achieving that is to pay their minions millions, even if it costs the shareholders.
During the bubble years, pay in the financial services industry went through the roof. It wasn’t just for the stars either. Fairly ordinary middle-ranking bankers raked it in. Even after the bubble burst, pay has taken a long time to come down. The 2007 bonus round was a record. Although pay was reined in after Lehman Brothers went bust in 2008, it rebounded the following year.