Why we should applaud the banking industryJanuary 27, 2010: 12:50 PM ET
I'm all for employees making a lot of money. Some of you get me wrong about that. I think that the people who have to go to work every day, deal with the vicissitudes of both success and failure, squeeze themselves into one costume or other to achieve maximum credibility, and worry about maintaining their standard of living in this tough economy deserve to be paid and paid well for what they do, regardless of the height of their branch on the corporate monkey tree.
The good news is that the banking industry agrees with me. This morning the New York Times reports: "Roughly 90 cents out of every dollar that these banks earned in 2009 -- and sometimes more -- is going toward employee salaries, bonuses and benefits, according to company filings." The paper also notes that Citigroup "paid its employees so much in 2009 --$24.9 billion -- that the company more than wiped out every penny of profit."
Of course, it's easy to be outraged by this if you're shareholder. But if you're an employee? This presents an interesting trend. Let's look at it piece by piece:
1. We need our salaries. In fact, as much as shareholders like to see the value of their investments grow, we like to see our salaries do the same. These days people look to see double-digit growth in their stocks. Why shouldn't salaries do the same, or at least exceed cost of living? Nobody gets all outraged if investors garner huge rewards on securities of companies that are otherwise doing a lousy job, or for that matter make a killing killing enterprises by shorting them. All's fair. Keep our salaries up there is what I'm saying, regardless of the performance of things that are beyond our control. Don't we have the same rights as piddling little investors who own .00000000001% of outstanding shares?
2. Benefits: Likewise. We all need benefits. It's why we have our jobs. How many of us, when we are thinking of going off to Tahiti or Des Moines and taking it easy, have the coincident thought, "But who will pay for my kids' new biteplate?" There's health insurance and our 401(k)s and all the other things that our corporations do to make our lives safer and ever-so-slightly more lucrative, even when we are no longer fully employed by them. Which of us, if you really think about it, is against our company investing more, not less, in this particular basket? And do we really believe that benefits should be linked to the performance of our enterprise? I think not!
3. Bonuses: Okay, here's where the rubber meets the pothole for a lot of people. That's because you all have a distorted idea of what a bonus is. A bonus is not a bone. It is not a treat that you give the puppy after he finishes all his or her dogfood. It's not a bauble that is offered only to the rich and famous. It is a part of each individual's compensation who has been hard-working and lucky enough to be entered into the pool. And those who receive their bonuses year after year come to expect them, not as a toy or an extra bar of gold to heap on their pile, but as tuition for Sally and Mark, both of whom are in college now, or the rent on grandma's condo in Scottsdale. Most of the folks in the bonus pool in most corporations make sums of between $10,000 and $25,000, did you know that? Sure, there are the lucky few at the top who set the standard for the rest. But the majority of employees who receive bonuses make reasonable money and would be lost without them. So good for banking! Way to take care of your people!
In short, what we have here, I think, is a redistribution of wealth from the shareholders, most of whom individually own miniscule wafers of the corporate entity, to the employees, who give their hearts, livers and spleens in pursuit of achievement and excellence. Some years, they triumph and the stock appreciates. Other years, due to circumstances way beyond most of their control, it does not. By all means, nobody who brings failure and ignominy on the company should be employed, let alone get a bonus! But those who simply worked hard day in and day out? Should they be punished? Or should we, the employees, be the first beneficiary of corporate largesse?
In this, as in so much, I believe Finance is leading the way. Let's hope the rest of corporate capitalism becomes equally socialized on behalf of working men and women everywhere.