Saturday, January 31, 2009

The Insanity Of Executive Compensation Legislation

Will the Obama administration really try to limit executive compensation through legislation? I hope not.

Enacting laws that establish ceilings on pay packages are all the rage at the moment, supported by the public, politicans and shareholders. All seemingly for good cause.

Just try and explain to a single mother struggling to make ends meet or a guy holding down two jobs to keep his family together how someone like Stan O’Neal, the former CEO of Merrill Lynch, could walk away with a $250 million bonus after his firm declared an $8.4 billion write-down.

Or why, after record breaking losses, multibillion dollar taxpayer bailouts and the demise or failure of some of the Street’s most venerable firms, over $18 billion in bonuses, the sixth largest haul on record, were paid out in 2008.

It’s a tough sell

It’s hard for most people to understand how top executives who oversaw debilitating losses that hurt so many people, could be so lavishly rewarded.

Senator Claire McCaskill, an early supporter and close ally of Barack Obama, proposed a law yesterday that would prevent executives from companies who accept TARP money, from making over $400,000. The same number as the salary of the President of the United States.

And while the on-line community, numerous politicians and many in the media seem ready to jump on this populist bandwagon, you’ve got to wonder what the ramifications of such a law would bring.

The business of Wall Street is making money

Those who work in financial service careers are often most motivated by money. They’re not looking to cure cancer, provide socially redeeming services or make the world a better place. They’re in it to get rich ... plain and simple.

It’s not just the traders, brokers and deal-makers who are out to make big bucks. It’s anybody who works for those firms. HR, legal, IT, marketing and every other function you can name, are paid more at financial service firms than in virtually any other industry.

It’s been that way forever and most of that pay comes in the form of bonuses that augment relatively low base salaries.

While one can question and even denigrate their values, the truth is those people represent some of the best and brightest talent in the country. And when things are going well, nobody blinks an eye.

But now, as the housing market implodes, credit tightens and the ranks of the jobless grow daily, we as a people look for scapegoats and it’s not too hard to find them.

Legislating salary caps is not the answer

In spite of all the claims to the contrary, salary cap legislation will only succeed in driving the best performers, especially those in the mid-level executive ranks, into non-TARP taking hedge funds, investment banks, consulting firms and related companies. And it will cause other businesses that could use TARP monies to help their constituents think twice before lining up at the trough.

Plus, it will do nothing to reduce a culture of greed at those firms not dependent on TARP funds.

How then, can we solve the problem of unmerited levels of compensation, obscene bonuses and unrepentant risk taking?

It’s already started. Using the bully pulpit and shining a harsh spotlight on those outrageous and undeserving payouts has begun to drive compensation down at many firms and the trend will only continue. Just ask the executives at UBS.

Having the President declare these excesses “shameful” does not go unnoticed by Boards of Directors and Executive Compensation Committee members concerned about their image and the public’s mood.

Legislating executive compensation at TARP taking companies will only drive top performers from one firm to another whereas continued public outcry, media exposés and Presidential outrage puts pressure on all companies, TARP takers or not.

As far as I know, that's how a democracy works.

Thursday, January 15, 2009

Who Cares About The Loss Of Executive Jobs?

Does anyone in government care about the loss of executive jobs? It sure doesn't seem like it.

I’m not talking about people making seven or eight figure packages but those at the VP and Director levels who are in the $100K+ range that upper end job sites like Exec-U-Net and The Ladders court.

Those are the folks that drive their local economies and the ones who are losing their jobs in droves. And when they’re not working or are worried about their income – a lot of other people experience their pain.

Where’s the help

Yet, while there’s plenty of talk about job-creating stimulus packages, you’d have to look long and hard to hear about any sort of coordinated government effort to help senior management find employment.

Of course, it’s tough to muster much sympathy for corporate executives these days.

Americans are outraged over the often obscene bonus and separation packages they saw awarded to failed or short-term executives. Those deals smacked of greed, arrogance and extravagance.

But the unintended consequence of that outrage is that all those that share the title “executive” wind up getting painted with the same brush no matter their level of compensation or quality of their work. And the government, who offers numerous job finding initiatives for entry and lower level positions, has done little or nothing for management job seekers, let alone executives.

There’s no bailout for them. They’re treated as the last holdover of unfettered capitalism and left to their own ingenuity and market forces to survive. They may use new technology to help find jobs but they employ the same techniques they’ve used forever.

20th century approach

Today, instead of reading the papers for ads, executives scour the online job boards; instead of contacting headhunters by regular mail they use email and instead of spending time in libraries researching companies, they are hunched over computers combing through company web sites.

The result is that while the tools may be different the process remains agonizingly slow. And the longer these people remain out of work, or fearful about their jobs, the greater the negative impact on the economy.

What can be done

So much more can be done to help executives find jobs but only government, working at the local, state and federal level has the clout to make it happen. Yet, there has never been a real government effort to facilitate movement between executive level employees and corporations.

One stop information on all companies in a given geographic area; a centralized data base listing jobs and consulting projects, announcements about company initiatives that would attract appropriate talent and entrepreneurial incubators are just a few of the ways government could help.

Today’s executive job seeker follows the same steps that career professionals have been parroting for over 40 years. And in a market like this, that’s simply not enough.

What we need is the commitment, resources and sway that only government can provide, to bring the executive job finding process into the 21st century and offer the assistance these people and our economy, so desperately need.

Tuesday, January 6, 2009

2009: Where The Executive Jobs Will Be

Millions of Americans have lost their jobs and more are yet to come but in 2009, enterprising executive job hunters will find opportunities in places others have ignored.

That’s in spite of the fact that the Bureau of Labor says that over 23 million or 14.4% of the labor force is out of work.

That staggering number is arrived at by adding the 10.3 million officially unemployed to what’s called the Hidden Unemployment Market comprised of the 7.3 million who are working part time because they can’t find a full-time job and the 5.4 million people who want to work but have been out so long that they’ve simply stopped looking.

That’s 23 million people and all indicators are that number will rise dramatically in the weeks and months ahead.

Problems bring possibilities

Yet paradoxically that upheaval creates new jobs to deal with the crisis while at the same time fledgling industries are being spawned and old ones are about to be revitalized.

So, if you’re out of work or concerned about the security of your job, here are some possibilities to think about.

Not all firings are driven by economics. Times like these encourage employers to discard “dead wood” along with those they’re truly sorry to see go.

As a result, 2009 will see a war for top talent as companies seek out the best & brightest to guide them out of the current mess. If you’re on the A-list and can really contribute to a firm’s profitability, then aggressively pursue top flight companies even if the words Hiring Freeze are plastered all over their web sites.

Follow the money

All indications are the government is going to be among the employers of choice, either directly or through companies they are about to fund and industries they are about to create. Infrastructure rehabilitation, renewable energy alternatives, smart power grids and other government funded initiatives will not only create more jobs they will create brand new job categories as companies will seek out infrastructure and energy analysts, directors and architects.

Stay abreast of the trends

They say necessity is the mother of invention and one of the most inventive approaches to help contact-seeking job hunters has been the rise of social and business networking sites like Facebook and Linked-In. And you can bet there will be more as the space gets divided into further industry and functional niches that will create new jobs at both the providers of these services and the staffing, marketing, funding and corporate users they attract.

Dig through the rubble

This ever-deepening recession is creating opportunities of its own. While hiring of many traditional financial service positions may never return to pre 2008 levels a whole new batch of positions are expanding as the “Street” tries to reinvent itself and workout specialists, turnaround experts, restructuring officers and the like are being aggressively searched for to deal with the crisis.

Know the safe havens

For quite some time both healthcare and to a lesser degree education have been areas of employment growth. 2009 will continue that trend as will services geared toward our graying population, the anticipated increase in regulatory requirements, an ongoing effort to monetize Internet offerings and within functional areas like technology and finance.

Put on your thinking cap - be innovative, concentrate on areas of growth and need and absolutely look outside of the box to discover where the jobs will be in '09.
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