LSA – I actually know a bunch of former clients in the C-level of Fortune 500 companies. At that level, you’re partly right the money in and of itself is not the primary motivator. They got enough to meet their financial needs, they don’t “need” more.

But in that upper echelon of business talent, business is a game… it’s a sport. And what these guys (mostly guys, a few women) desperately need is a way to KEEP SCORE.

This is what they compensation package provides… a way to keep score. Maybe it shouldn’t be this way, but for 9 out of the 10 type of people I know at this caliber, they need a way to track how their career is progressing.

I kind of like the earlier suggestion of deferring the bulk of the compensation… which I think meets shareholder/tax payer needs, while still would be a draw to the top talent.

Basically, in the social circles these guys hang out it, a person who would take a take C-level job at a bailed out bank, having the government as your boss (yikes!), deal with all the BS that comes with it, AND take a 90% pay cut to do it would pretty much be considered a complete moron.

Again, I don’t necessarily think that… but I’m just trying to share my take on what happens in these social conversations in those circles.

As for stirring up the pot, I was actually quite surprised there was so much discussion on this topic. I thought it was a pretty much open and shut case (but certainly am open to changing my mind).

Actually this post and the one on switching from Windows to Mac have gotten the most comments (who knew?).

Thanks for your contribution (and others) to the conversation… I eagerly await what this social experiment called blogging will bring each day.

Remember that those folks you claim are “really good at what (they) do” augured their firms into the ground, while attempting to still take those high salaries home. This begs the question of what is the definition of “what they do”. Seems that it is simply to extract money. So do I want to finance that with my tax money?

This leap of an assumption that high pay will by itself cause the best suited to gravitate to a job is a serious error that is rampant in the business community. We all know of firms that purposely pay below-average salaries to avoid the money-only-seekers and to attract the motivated and proficient.

Thanks for giving me a little more insight on the thought processes and values promoted by this site. Or perhaps your comment is just a radio-talk-show-style incendiary remark, intended to generate traffic. In that case, it appears to have worked, and thanks for giving me a little more insight on the thought processes and values promoted by this site.

LSA

Firstly, let me respond to the initial post then proceed to some of the responses. I agree that these short sight measure imposed by your administration. Who would work in a situation where all the cards in the deck are against you and you are being paid blow that which the market will bare? The answer is implicitly someone (as Victor had indicated) unqualified/unequipped or someone with a HUGE ego that wants to prove him/her self. I for one would NOT have confidence in a bank with such a leader. Yes he/she may have the potential to turn the situation around; however, they could just repeat the same mistakes… The point is it is a risk, potentially a major risk. I would suggest probably more of a risk than paying an expert a fair and equitable compensation package.

To D. Tong, lots of great points. Should the American taxpayers be held hostage by a few highly-compensated Wall Street bankers? Although you answered NO; let me propose this. Would you pay someone that holds the keys to successfully adverting destruction worse than a nuclear bomb? Or would you choose to pay less for the potentially unqualified and definitely inexperienced person? Unfortunately, that is what it ultimately boils down to.

To Ron, interesting points. I agree that personal achievement maybe motivation for some individuals. I agree that if someone took these banks and turned them around he/she would be offered multiple roles at other companies. Unfortunately, I doubt one of these people would emerge from the woodwork. Let’s face it the probability for failure even for an experienced veteran is relatively high in the current environment. I for one would like the favorite on top rather than the scrappy underdog that may have potential but has not proved it.

Thanks,
Kris

It’s not that I care what any of the C-level corporate boys (and gals) are making, as a matter of fact I think that most of the pay is grossly inflated and probably due more to “Board of Director” in-breeding and nepotism than anything else.

However, I think the solution should come from some type of market mechanism, and definitely not put “bailout companies” at an actual competitive disadvantage because of some short term political consideration that almost nobody will remember or appreciate even 10 months from now.

My two cents.

Ron – I don’t think I disagree with you all that much. I have no problem with deferred compensation. But in general, I do have a problem with not being able to afford to put good people in the right roles.

Keith I totally agree with your point about C level compensation in general. Personally, I think the comp levels are fine, but the form of currency is all wrong.

C-levels should be paid out in stock that’s restricted so they can’t sell it for 10 years. It’s fine to make your quarterlies but don’t screw the business up so bad it’s worthless 10 years from now.

It puts a greater emphasis on making decisions that are smart in both the short and long run. It penalizes “managing earnings” to goose near term revenues at expense of long term profits. In other words, it makes C-levels operate more like true business owners — ones that are very aware that there is always a personal upside and downside to every business decision.

Most hired gun CEO’s suffer no personal downside when they make a bad business decisions. Heck getting fired is nothing compared to having your life’s savings on the line.

I disagree somewhat with your thoughts below. I think the only people that should be managing these grossly poorly managed companies are people that should be paid only US$1/month until the turnaround is completed. Then and only then should they get great compensation. For these companies to survive, a lot of people will have to make sacrifices, and it should start right at the top. He should be #1 role model for cuts.

Personally, I kind of like Carlos Gohn’s approach to his accepting coming here to Japan and turn around Nissan. He said right up front that he would fire himself in three years if he couldn’t get the company profitable by then. The rest is history.

The sole goal of accepting one of these turn around jobs should be just that and not a great deal of personal profit (with the company in such deep holes).

I fully understand that my thoughts might be in the clouds and possibly few people will pick up these assignments, but a great turnaround would make a big impact on someone’s future no matter what the direct compensation package is. I’m sure it will have to be people who no longer need the money. They just want the assignment, the challenge and the desire to serve.

You might be right, but I hope I am.

We will see.

Thanks for the thoughts.

Ron in Tokyo

Yeah, I voted for the guy. I’m generally a middle of the road guy politically… and I would have like to vote for McCain minus two big problems. One, he himself admitted he didn’t know anything about the economy. (And in comparison Obama had Warren Buffet and Volker to advise him).

Second, I had difficulty with the idea that Sarah Palin (the now self proclaimed “Rogue”) holding the key codes to the nuclear “football”.

I did expect Obama to be less favorable to businesses, but certainly not to this extent.

You raise fair points. But in many (but certainly not all) cases the guys who screwed are already gone. The people in place now are those who are supposed to clean up the mess left behind.

Personally, if I’ve made a $1 trillion investment, I’d like to have the best possible person in the role to look after it so I can get my money back. Happy to spend $10 million to get back my $1 trillion.