Goldman Sachs is different. Much stronger, and arguably much smarter, than many banks on Wall Street, they emerged from the crisis relatively intact, with many believing they took TARP money more at the government's request rather than out of a need. Goldman has announced they plan to return the money shortly.
Today their CEO, Lloyd Blankfein called for a new approach to compensation on Wall Street. According to the AP
_Compensation should include an annual salary plus deferred compensation.
_For senior employees, most of the compensation should be in deferred equity.
_Individual performance should be evaluated over time to avoid excessive risk taking. All awards of stock should be subject to future delivery or a deferred ability to exercise them over at least a three-year period.
_Senior company officials should be required to keep the bulk of the stock they receive until the retire.
It all makes sense at first pass and is likely overdue. Ironically, it represents a step backwards in thinking, albeit a positive one. Remember when banks were supposed to be bastions of stability built for the ages? This represents a return to that kind of thinking.
According to the wire report, "The standards he proposed for executive compensation in the securities industry should reflect an individual's ability 'to identify and create value,' he said."
Hopefully the standards will mean that bankers also realize that they need to create something of value as well. It's thinking the rest of the industry should consider as well. If we all believe we are in it for the long haul instead of for this year's bonus cycle, what kind of differences in thinking will it lead to?
It's a question not only to ask of bankers and CEOs, but of everyone in an organization. How would sales people act if their bonuses were tied to quarterly numbers as well as long term customer retention? How would marketing behave if they had to worry more about market share in the future? What would procurement do differently?
Maybe one way compliance will be helped by the current economic mess is through people looking beyond the quarter to the next five years, and maybe then the shortcuts won't seem worth the risk.