I have been writing a lot about leadership over the past few weeks as responsible and moral leadership is much needed to lead us out of this financial, economic and social crisis. Yesterday I gave the shout out to CEO Jeff Immelt for his bold remarks, and today I would like to compliment the leadership shown by Goldman Sachs in adjusting their compensation structure. I have recently written about Goldman’s outstanding business principles and challenged them to ensure they are living up to them. They also have a set of compensation principles, which in print look outstanding indeed. CEO Blankfein was quoted as saying “we believe our compensation policies are the strongest in our industry and ensure that compensation accurately reflects the firm’s performance and incentivizes behavior that is in the public’s and our shareholders’ best interest.” Whether it be in cash or stock I am not sure what the ‘right’ level of compensation that is in the public’s best interest, but this recent action is most certainly a step in the right direction. More on this from the WSJ. A few weeks ago we called for them in this oped to be a leader in the industry, and they are doing just that!
For the record I am against these bank bonus taxes, and not because I was once a banker of sorts and have friends that are bankers. My reasoning relates to “what is a bank” and “what is a banker?” One of the main issues contributing to this crisis is the development of a shadow banking system, largely unregulated, that dwarfed the real banking system. Hedge funds, private equity funds, the GSEs, rating agencies, mortgage brokers, and so forth are all part of the system that contributed to this disaster and to impose a tax on only those in a classsic bank is just not right. I do think compensation got out of control in general and was deeply one sided and the public is paying for the clean up. That said what is needed is more of what I wrote about in the first paragraph. Responding to public pressure, shareholder pressure, and I hope in part by thinking about what is ‘right’ firms will and should rethink and be held accountable for their compensation practises. Government telling companies ( non bail out ) what they can pay their people is in my view against what this country is about and very dangerous indeed. What I have no space to go in to is the compexity and craziness of actually implementing something like this…. I deeply respect that so many people are suffering great financial hardship, but in this one writers opinion, a bonus tax does little to solve the problem. What will is real leadership and accountability.