Business porn – Pt. 2

Posted by Marc Hodak on March 4, 2009 under Executive compensation, Scandal | Be the First to Comment

The big report today on the cover of the W$J and Reuter’s feed was that Merrill’s top ten paid executives earned $209 million for 2008.

The story (Version 1 – Wall Street Journal):  2008 was a horrible year for nearly everyone; big banks like Merrill were responsible; they would have failed, but they got bailed out by us (taxpayers); their top executives, far from suffering like the rest of us, made millions, or tens of millions (from us!).  But the NY AG is investigating the bonuses, so they may be made to pay for their greed.  The moral of the story?  Greed is alive and well on Wall Street, and we’re getting taken advantage of, except that our valiant public servants may set things straight.

The un-story (Version 2, teased from the same set of facts): Merrill was on the edge, with part of the bank plunging into the deep, largely as a result of bad decisions.  Other parts of the bank had to pull that much harder to keep the whole firm from going all the way under.  Several of those parts, including investment banking, global-rates, fixed-income, currencies and commodities were profitable, largely as a result of good decisions.  The good part kept the firm afloat.   So, while average pay across the firm took a huge dive (and many people lost their jobs), the pay in the relatively good divisions was only down between 3 and 9 percent.  The NY AG, posturing for the press, demands gobs of information about the bonuses, threatening to divulge competitively sensitive information, based on a theory of public harm so tenuous that the press doesn’t even bother to articulate it.  The moral of this story?  If you save your company, your grateful bosses will take care of you, even when the rest of the world is screaming for blood.

The second rendition is clearly the inferior story.  It doesn’t excite populist passions, or trade on outrage, envy, or resentment.  It doesn’t reinforce the lie that we’re all the same, equally worthy of other’s riches, and that the only thing that prevents us from re-entering Eden is are those unrepentant sinners.

Last year, Larry Ribstein claimed that the new disclosure rules for executive compensation served no real purpose other than mass media titillation–what he referred to as porn for the business pages.  I am more convinced than ever he was right.

UPDATE:  It looks like Andrew Cuomo read the same article, and issued subpoenas to the seven people named in it:

“We want the executives to testify under oath in our office about their work, the size of the bonus pool, the timing of the payments, their individual bonus and interaction with Mr Thain,” said the person familiar with the probe.

Once again, no mention whatsoever–not one word–about what Andy is fishing for in this testimony, as if that doesn’t matter at all.  No mention of what Andy will actually get from this bullsh*t distraction, other than free publicity for his run for governor.  Charges?  There will be none.  If there are, there will be no case.  If there is, there will be no convictions.  This is pure political theater.