Monday, November 17, 2008
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.