Group of 20 standards barring bonus guarantees for more than one year and requiring deferred pay for top executives would take recruitment tools away from banks already burdened by diminished share prices and damaged reputations, some recruiters said. The plan adopted at last week's G-20 summit may benefit Goldman Sachs Group Inc.,JPMorgan Chase & Co. and Morgan Stanley, which have been quicker to repay government aid. "Limiting guarantees to one year could hurt banks like Citigroup and Bank of America by putting them at another disadvantage in hiring," said Colleen Westbrook, a partner with Morrison Cohen LLP in New York and a former counsel at the Federal Reserve Bank of New York.For starters, I'd note that there is plenty of unemployed talent these days that once worked on Wall Street. Those out-of-work bankers could easily step in to help ramp up the staffs of such lesser institutions. The only thing worse than working for a firm on the edge of collapse is, well, not working at all. Since so many financial minds these days find themselves in the latter predicament, I doubt such firms will be too hard pressed to keep their cubicles farms and trading desks buzzing. But what about the best talent -- that will still gravitate towards the best firms, right? Sure, but that's how it's always been. These lesser banks already have a distinct disadvantage, because no one in their right mind, with better prospects would want to work there. I'm not convinced that, unless truly exorbitant, even a three-year guarantee will convince anyone who isn't sure if the firm will be there in a year to make a move. Besides, with my first-hand knowledge, I'll be the first to assert that Wall Street talent is highly overrated. Banking and trading isn't nearly as hard as you might think, and many individuals have the intellectual capacity to do it adequately. The select few who possess truly extraordinary talent probably wouldn't be interested in the new Citi anyway, and never would have been interested in Bank of America. Another option: how about looking for loopholes? For example: let's say that a vice-president at Goldman is expecting compensation next year of $500,000, $750,000 the following and $1 million the year after that. Citi can't write him a 3-year guarantee anymore. But it could give him an on-the-spot signing bonus of $3 million. That's still allowed under the G-20 rules (once it pays back its bailout money, that is). I don't know about you, but I'd at least consider that offer. Such arrangements will obviously still be pretty hard for these ailing banks to come by. After all, they're cash-strapped as it is. But I find it pretty difficult to muster up much sympathy. Don't forget: the banks we're talking about are in the worst shape and really should have failed. They only exist today because the government decided to throw them a giant life preserver.
This article available online at:
http://www.theatlantic.com/business/archive/2009/09/new-pay-rules-could-kill-ailing-banks/27487/
