Well, that didn’t take very long at all:
NEW YORK — Even before the Obama administration formally tightened executive compensation at bailed-out companies, the prospect of pay cuts had led some top employees to depart.
The administration had tasked Kenneth Feinberg, the Treasury Department’s special master on compensation, to evaluate the pay packages of 25 of the most highly compensated executives at each of seven firms receiving exceptionally large amounts of taxpayer assistance.
But Thursday, he ruled only on slightly more than three quarters of the pay packages that were to be under his purview. The balance reflected executives who have left since he began his work in June or will be gone by the end of the year.
Many executives were driven away by the uncertainty of working for companies closely overseen by Washington, opting instead for firms not under the microscope, including competitors that have already returned the bailout funds to the government, according to executives and supervisors at the companies.
“There’s no question people have left because of uncertainty of our ability to pay,” said an executive at one of the affected firms. “It’s a highly competitive market out there.”
At Bank of America, for instance, only 14 of the 25 highly paid executives remained by the time Feinberg announced his decision. Under his plan, compensation for the most highly paid employees at the bank would be a maximum of $9.9 million. The bank had sought permission to pay as much as $21 million, according to Treasury Department documents.
At American International Group, only 13 people of the top 25 were still on hand for Feinberg’s decision.
Whether that’s a bad development or not remains to be seen, of course, but it’s perfectly clear that Wall Street executives are just as capable of reading and responding to incentives as anyone else. And, if policies like this force away the good talent to companies not within the jurisdiction of the pay czar, or overseas, then that will be a net loss for the American economy.
Call it the law of unintended consequences in action.
Disappearing talent, stunted business savvy and timid leadership at the big bailed out financial firms means whatever is saved in compensation expense will be lost many times over in TARP capital not returned to the US Treasury. This is pennywise and pount foolish. It’s what happens when governance is driven by a desire for power instead of a push for profit.
I highly doubt the veracity of some of the claims in this story. I doubt that these people who ran the banks and AIG into the ground are in high demand by other reputable employers, and I doubt that people are leaving to find more lucrative positions elsewhere. When I see some names attached to those claims, the story might have some credibility.
These folks will be in demand, most were very successful running businesses in risky environment, and only failed when regulation caused it. Businesses that are looking for risk takers to actually make a profit, not just stay stable will hire most of them in a heartbeat.
And banking will be left with middle managers who were afraid to leave running the show.