What does the Fannie and Freddie tally come to? Roughly 7,600 employees will receive a total bonus pool of about $210 million over 18 months, which started in late 2008 and will run into 2010. Before you go riot in the streets, this tally comes up to $27,631.58 per person on average. That may sound like a lot when you tally up how much money these companies lost. But depending upon where you live and depending upon how much you make, this could be a line-item.
Senator Grassley called it an insult yesterday, and he is on the Senate Finance Committee. Is this really an insult though? You know that this is no way an “equitable” average. There will have been some who received far higher and some who received far lower. The interesting part is that there has become a pervasive expectation that employees at companies who took money from the government need to take a huge hit regardless of what their duty or unit is responsible for. There are 100 other arguments for or against this, and this is no means the defense of “But O.J. is really a good guy, you just only know the side of him portrayed by the media.”
One of the arguments against what some call deserved compensation and some call excessive compensation is that there is no place for these workers to go anyway, so they just have to stay there and take dictated and mandated pay cuts or salary caps. Does that sound a bit like indentured servitude? It sounds like an exaggerated form of servitude at least. Frankly, they are right about there not being a place for most of the support workers and most of the back office and oversight positions. For the rainmakers, there is always a place to go. The rainmakers have slowly started telling these oversight watch groups where they can go, as many have started to leave to either form their own companies or to go to a competitor where they are not capped.
How many of these people at Fannie or Freddie are really rainmakers? By our count in today’s mortgage arena, probably not that many. But how many of these need to be kept on to fix the mess that is there inside these? If the history of government efficiency is valid, then probably all of them and then some. Employees need to be compensated for work regardless of the company’s bottom line. Ask your self how eager you would be to tell your friends or a stranger that you work for Fannie Mae, Freddie Mac, or even AIG. Would it help when you tell them “But I am one of the people that is fixing the mess!”? No it would not.
We have referred to the compensation issue now having taken on some characteristics of the French Revolution. Ultimately, the revolt generates results and the change occurs, but the problem about angry crowds waiting to watch the next person get the guillotine is that after a while the crowd no longer asks or cares if the person who is about to get capped if they had anything to do with the regime issues before. So do not be surprised if or when this revolution on compensation spreads.
So far this has just been a form of ‘selective socialism.’ What if the ‘taking government assistance money’ takes on a much looser definition? What if you are in a sector that derives over 50% of their income from the government or from units of the government? And what if you are in an industry that the public wants to see reform in? Healthcare and defense immediately come to mind. And what about “essential human services” that many people would consider a right rather than a privilege? You could start to make the argument that utilities were once a right. Or what about highly paid executives in the energy field? Would gas be cheaper if oil companies did not pay so much at the top and all through the ranks? This may sound like a rant. It is not. It is a warning about how far the pendulum can swing.
It is easy to get caught up in the issue on compensation. Many abuses were rampant. The media will carry it on and on until it stops selling advertising. It is currently just about the easiest topic to get caught up in. Many don’t care and just want these companies gone and want the money taken away from the people inside. I have heard this argument from educated people in recent weeks in more than one setting and more than one instance in more than one variation of that notion. The notion that “People are P-O’d” has taken over. In some cases rightfully so. In many cases it has been unfair.
There is one last misconception in the public that these financial companies have handled as poorly as they could have handled it. Many of these ‘bonuses’ are not really bonuses. Many of these bonuses are methods that companies use to actually pay out less money overall or to put the golden handcuffs on employees to keep them there for many years. That is its own topic and worthy of another story.
Do we, or do I, defend all bonuses regardless of the environment? The answer is “absolutely not.” But do we defend the compensation packages for the rain-makers and for the people who assist them in bringing the rain? In that notion, yes and yes regardless of whether other units or workers put the company in a horrible situation. These people did not go to work for a “.org” and did not sign up to be government wage workers. Many of them have nothing to do with any of the issues that caused this current mess, yet they have to sit under the same umbrella as those who participated in creating the issues of the current situation.
There are changes coming in compensation. Many of those changes are deserved. Some are not. Some companies have started to move away from the “bonus” structure, or have at least indicated this. That is just one of the steps that need to be taken.
JON C. OGG
April 4, 2009
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