Wall Street, Investment Bankers, and Excessive Compensation

[Rage for Order]

The discussion regarding the $54 million bonus paid to the CEO of Goldman Sachs, and the subsequent thread explaining the long hours and working conditions of investment bankers was quite interesting. Naturally the opinions varied widely, with the majority of respondents seeming to agree that the amount of the bonus was obscene, uncalled for, unearned, unjustified, or some other "un". Personally, I don't see anything wrong with the bonus considering the record-breaking profits that Goldman Sachs earned under the CEO.

It got me thinking, what exactly is the objection of so many to the amount of money the man made for the year? For the sake of argument, let's peg his total compensation for the year at $60 million...$54 million bonus and $6 million in salary. Was it the fact that he was paid the bonus at one time? Maybe people don't think the work he did was worth it. Others may have thought that nobody should make that much money in a year. Perhaps people think it was robbing the shareholders of value that should've been paid in dividends. Whatever the reason, many people agreed that it was too much money. This begs the question, how much is too much for one person to earn? Let's consider the highest earning celebrities for 2006:

Steven Spielberg $332 million
Howard Stern $302 million
George Lucas $235 million
Oprah Winfrey $225 million
U2 $110 million
Jerry Seinfeld $100 million
Tom Cruise $67 million
Bruce Springsteen $55 million
Elton John $34 million

The top 100 list is here:

http://www.forbes.com/lists/2006/53/Compen_Salary_2.html

65 of the top 100 paid celebrities made $20 million or more, yet there was no outcry that it was excessive. The top 15 paid celebrities all made $50 million or more but again, nobody cried foul over that. These people made just as much money,so why wasn't there the same reaction and outrage about how much money they made? Is it because they didn't earn most of it at once, or was it simply overlooked? Certainly the studios could've paid this money back to shareholders in dividends. And what about the camera operators, caterers, sound people, people who build the set, assistants, etc? How much did they make? Probably less than 6 figures. Why not distribute some of the wealth to them? Why not lower the price of a movie ticket to $3 instead of $8? Certainly a movie is not contributing more to the economy than an investment bank. The question is, how much is too much? Should we put a cap on how much an individual can earn? If so, what is that cap? And if there is to be a cap, how do you motivate people to continue producing for the calendar year once the cap is reached?

[unblock]

1. goldman's ceo got much more than $54mm bonus

even top traders there got about $100mm.


but your point is well taken, wall street is not the only place with dramatic total comp numbers.

[Rage for Order]

2. The bonus is what set off the whole conversation

I have issues with CEOs that are given golden parachutes or large bonuses when they leave a company in worse shape than when they took over, or when the company loses money for the year, lays off workers to cut costs, decreases benefits to save money, etc, but not when the company flourishes, earns record-breaking profits, and doesn't do so by taking advantage of its employees.

[The Deacon]

3. Celebrities Produce Entertainment

Wall Street produces (through their greed for ever increasing share prices) empty factories, dying industrial towns, abandoned toxic waste dumps, slave labor & sexual abuse overseas.
Which kind of wealth would YOU prefer to have to justify?

[unblock]

4. celebrities produce gossip

wall street produces the lubrication for the economic engine.

the evils you cite are better blamed on greedy and/or stupid corporate executives and/or dumb luck and shifting economic times rather than the financiers who mostly just move risk around to people better suited and willing to take it.