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EXECUTIVE PAY: THERE THEY GO AGAIN
If you hit yourself over the head with a ballpeen hammer – that's stupid. But if you do it again, that's insane.
Welcome to the insanity of Wall Street. Having fostered a corrupting culture of banker greed by basing the lavish pay of top executives on their ability to score short-term profits (whether by hook or crook) the reckless financial titans crashed their own banks and our economy. So, barely a year after the crash, what's the response of the banks? "Hey," they're shouting, "that was fun – let's do it again!"
James Reda, an executive pay consultant, studied the changes that 191 of America's largest banks and corporations have made this year in the way they reward top managers. With the public outraged by executive excess and congress considering pay limits, Reda presumed that most bosses would have cut back on the short-term, grab-all-you-can pay incentives and shifted to a rational system that rewards executives for long-term performance.
Wrong. It seems that corporate culture is at war with sanity. Reda found that companies did change their pay policies – but by increasing short-term incentives and actually reducing incentives for sound, long-term performance! Reda found that these big outfits are even retaining such ridiculous perks as "tax gross-ups," which mean that executives don't even have to shell out for the taxes they owe on their exhorbitant pay – instead, shareholders pick up their tax tabs. The message to pampered managers is clear: You'll be paid more if you take additional unethical shortcuts and take greater speculative risks than you did before.
Let me reiterate that the short-term profiteering they did "before" is what wrecked the rest of us. Why is Washington letting them hit us over the head again with the same ballpeen hammer?
"More Business as Usual," www.nytimes.com, August 18, 2009.
"The Quick Buck Just Got Quicker," www.nytimes.com
August 16, 2009.