David Enrich, Sara Schaefer Munoz and Aaron Lucchetti today contribute a front page Wall Street Journal article on ways that financial institutions are working around the caps on pay set as a condition of the financial bailout.
For history students who know that employer-paid health insurance was a work-around during economy-wide wage caps imposed during World War II will find all of this depressingly familiar.
Such moves are a contrast to concessions recently made by large financial firms in hopes of defusing public anger, and political retaliation, over the comeback of sky-high compensation. Many banks and securities firms are paying bonuses with a bigger percentage of stock. Goldman, for example, sharply reined in pay and benefits during the fourth quarter. This week, the firm told partners that 60% of their 2009 bonuses will be in the form of restricted stock.
The new pay culture is squeezing bankers with hefty mortgage payments and private-school tuition bills—and has prompted some companies to find ways to assist cash-squeezed employees.
The caps and rules assume that companies pay employees large salaries as part of fraud when in fact the salaries are the product of a competitive marketplace. During World War II when a company needed to woo a key employee from another company, they needed to find a way to pay more and used health insurance to do so. Now banks are doing the same thing with employee loans.
The article further depresses by hinting at the incredible intellectual energy that is spent hiding from or dodging the rules, rather than focusing on making money for the shareholders.
The three reporters did a solid job of digging up information the companies surely did not want on the front page of the Journal. Here's hoping it makes the rule-makers aware that compensation whack-a-mole isn't helping anyone.
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