Monday, November 17, 2008

Risking our best talent

Wall Street will be facing a talent retention challenge very shortly unless the bonus issue is elegantly handled this year.

Over the past week the news has been full of "outrage" and questions about whether bankers should get their bonuses this year. Talk of large chunks of the bailout going to top bankers and class-warfare type language.

But unfortunately this problem is not as simple as the government, or the "public" controlling the pay of an industry they don't understand. I'm a pretty hard-core democrat and yet when I hear talk of the US taxpayer wanting zero bonuses on Wall Street this year - per a Bloomberg article today - it concerns me that the public doesn't understand how talent works.

Our best companies are very, very competitive. In all but a very few rare cases, a company is only as good as it's people. And companies, like fish, rot from the head. It's a common adage in my world that A players hire A players and B players hire B and C players. Talent is everything. So, in the competitive world of banking it is essential for the long term health of our institutions that they keep the talent, within the institution if at all possible, and definitely within the country. Our best deal-makers will go where the money is and that had better be in the United States and at the institutions that make our financial systems work.

So while I understand that taking public money and using it to pay bonuses may be optically obscene - and it is certainly a good idea for the very top management of the institutions to not take bonuses - if that action is taken too far down there will be a negative backlash - and the talent which is so critical to long term health will leave. There are too many other firms, and countries, that will be happy to hire them.


Andrew said...

Hi Penny,

I'm emailing you in regards to an email I sent to you last month about a partnership, have you had a chance to think about it?

If you have any questions or would more information, please advise me and we can go from there.

Kind Regards,
Andrew Knight

Anonymous said...


There should be no extra compensation for running banks into the ground, especially with our tax payer dollars. I keep hearing that the "talent" will leave. The ability of the "talent" to prudently judge risk appears somewhat deficient, so I say good riddance. It seems to me that everyone involved in the fanancial field uses the same justification to increase their own importance (and bonuses).

It's like grade inflation. When everyone is getting millions, what's a few more million for the exceptional "talent".

Me said...

I would have to disagree that bonus to be paid to Wall Street banker for being a "talent" banker. Like any industry, it is pay-for-performance. If someone did a great job and helped his company made a ton of money, sure, he/she deserves his/her bonus. But not when he/she lost tons of his/her clients' money and drove the company to the ground.

If your employees are "guaranteed" a bonus whether they did their job or not, whether the company did well or not, just because they are considered "talented". What is the motivation to work hard and do well? Would you tell that to your employees?

Penny Herscher said...

I think the issue is to be able to reward bankers who did quality work, making money for clients and the firm, on transactions completely unrelated to the credit crisis - for example M&A bankers. Yes the teams who screwed up the banks balance sheets should not be rewarded, but that is not the whole talent pool.

There was an error in this gadget