Memo to Wall Street
The problem with Wall Street's leaders is not that they have a blind spot when it comes to bonuses. It's that they don't have a clue when it comes to the deep-seated public revulsion about what they do and how they do it--not just frustration with bad deals, but disgust with bad values.
Memo to the Masters of the Universe: You're not just facing big-time pay cuts. You're facing a long-term demotion in your reputation and standing. To borrow from the title of a forthcoming Hollywood movie, "We're Just Not that Into You."
This current financial meltdown, after all, is merely the most recent in a series of sickeningly predictable disasters born of individual greed and collective stupidity by some of the best-educated, most highly paid, and most privately arrogant, business leaders on the planet.
Wall Street has won the Triple Crown of Folly. During the late 1980s, there was the LBO boom and junk-bond explosion, which ended in a financial meltdown and a best-selling book called, appropriately, Den of Thieves. The 1990s brought the first dot com boom and bust, the Wall Street research scandals, and the unappetizing sight of respected investment-banking analysts urging their clients to buy stock in companies that they were disparaging to their colleagues. And now, as we enter the first decade of the 21st century, we get the mortgage crisis and the credit crunch.
Yet here's the problem with the financial elite. Not only do they want to continue to pay themselves huge salaries and bonuses, they don't want to accept personal responsibility for the havoc they have wreaked. Daniel Gross (of Newsweek and Slate) brilliantly captured this self-serving model of leadership last week, in a dispatch from Davos, and the annual meeting of the World Economic Forum.
Dan highlighted the glaring intellectual blind spot among the participants. Here's how he put it: "At least with regard to finance and business, the consensus [at Davos] seems to be clear: Success is the work of Great Men and Great Women, while failure can be pinned on the system."
In his dispatch, Dan nicely captured the contrasting treatments of success and failure. One Davos lunch, he celebrated the "transformative power of the individual," shining a spotlight on the work of Bill Gates, Richard Branson, and Nobel Peace Prize winner Mohammed Yunus. Yet when CNBC organized a discussion of the financial crisis, there were three questions on the table: Which policy assumption failed? Which regulatory failure was the biggest shock to the system? Which market failure was worst?
Notice the difference in cause and effect: "Just as financial markets in the United States privatize profits and socialize losses," Dan comments, "Davos and other conferences privatize success (by chalking it up to individuals) and socialize failure (by blaming it on large systemic problems)."
So it goes for the Wall Street elite: We'll gladly take the credit (and the pay) for good times, but don't blame us (or deny us our bonuses) when things go sour. Welcome to the no-fault economy!
If I were at the top of a major financial-services firm, I'd worry less about how much I make and worry more about how I make amends. If I were in Washington, DC, writing taxpayer-funded checks to overpaid bankers, I'd certainly want to curb their excesses. But I'd also want to unleash some intellectual honesty. So I'd require the top leaders of every firm that receives taxpayer funds to offer detailed answers to four simple questions:
1. What is one major strategic mistake you made over the last two years--and what did you learn from that mistake?
2. Did you see the financial meltdown approaching? If not, why not? If so, how did you prepare your company for it?
3. What personal sacrifices are you making to respond to the sobering realities of the economy?
4. What personal responsibility as a leader do you bear for not acting boldly enough, or speaking out loudly enough, to have helped avert this catastrophe?
The only way to overcome Wall Street's blind spots is to force its leaders to look in the mirror and see once and for all how much damage they have caused.
Posted by: Wallenstein | February 4, 2009 1:21 PM
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Posted by: sgoldpsta | February 3, 2009 4:42 PM
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