Wall Street's big
holiday gifts hint at nation's wealth gap
USA TODAY on the Web,
December 26, 2006
Our View: When bonuses reach
$50 million, something is badly off track
For workers lucky to get a turkey as a Christmas bonus, the year-end payouts to
top Wall Street executives must seem unimaginable.
Earlier this month, Morgan Stanley CEO John Mack took home $40 million, a record
bonus for a single year's performance. Days later, his record was smashed
by the $53.4 million payout to Goldman Sach's Lloyd Blankfein.
If executive pay as a whole has reached insane levels, at major securities firms
it is insanity on steroids. The payouts to Mack and Blankfein are part of
$24 billion in bonuses New York's comptroller expects will be paid by securities
firms this year, thanks to surging 2006 profits.
Some might see it as Scrooge-like to begrudge big bonuses in such a bountiful
year. But the whopping payouts underscore something of greater social
importance: the nation's growing disparities in wealth. The top 10%
of income earners in the USA own 70% of the wealth, according to a Federal
Reserve study. And while hourly wages are forecast to increase about 3.5%
this year, Wall Street bonuses are expected to jump 15% from last year.
These trends are a recipe for resentment and class conflict.
To be sure, senior Wall Street executives are highly skilled workers and deserve
hefty pay. Yet the surge in profits on Wall Street is the result of global
economic forces -- rising markets and a wave of corporate mergers -- that these
fortunate executives did not create and can't claim credit for.
If the rationale is their expertise, do they deserve to profit from events
beyond their control any more than unskilled workers? And should they be
able to do this at the expense of, and with little input from, shareholders in
These payouts are also hard to justify on the basis of retaining top talent.
At Goldman Sachs, they might actually be driving people away. After all,
when you're fabulously wealthy, why stay? Blankfein's two immediate
predecessors, Treasury Secretary Henry Paulson and New Jersey Gov. Jon Corzine,
left and took the enormous pay cuts associated with public service
At Mack's company, some of the biggest paychecks have been to get rid of people.
His predecessor was paid $113 million to leave after fomenting a state of near
insurrection in the ranks.
Defenders of Wall Street's pay packages say they are actually quite reasonable
in the context of the fortunes made by hedge fund managers, Silicon Valley
entrepreneurs, entertainers and athletes.
That argument illustrates the problem. Advancing technology and mass media
have created an environment in which vast fortunes can be made in a virtual
blink of an eye. So be it. That is to be expected, perhaps even
encouraged, in the name of capitalism.
But the Wall Streeters don't put their own capital at risk. They haven't
devised hugely innovative products such as Google or YouTube. People don't
buy tickets to see them perform. Yet they look to the people who do these
things as benchmarks.
For those on Wall Street who feel envious or left behind, we offer this advice:
Go start your own company, or else take up acting.
Opposing view: Well-paid CEO’s enrich U.S.
With 5% of world’s population, USA home to half of largest companies.
Go to USA TODAY “Today’s Debate” 12-26-06 for Opposing View on this.