Posted 7:02 PM by steve

The kerfuffle over Wall Street bonuses (especially as to the bonuses paid by financial firms receiving federal bailout money), corporate jets (Citibank and the Detroit automakers, all recipients in some way of federal rescue funds), corporate outings (AIG, yet another recipient of rescue funds) and lobbying (Fannie Mae and Freddie Mac, two more of a somewhat endless list of firms getting taxpayer money) are all rooted in a combination of (1) the belief that such expenditures are not legitimate and necessary business expenses but instead represent excess spending that shouldn't be taking place and (2) a desire of lawmakers and the public to 'see them suffer' by forcing employees of such firms to take publicly available transportation and do without any type of activity that can be remotely characterized as either celebratory or of rewarding prior performance*.

'Defenders' of such practices (to the extent that anyone dares do so in public) argue that such expenditures are in fact legitimate and that subjecting these companies to such things as caps on executive compensation actually jeopardizes their future as employees denied the ability to take private jets, hold conferences in exotic locales and be paid 7 and 8 figure bonuses are sure to flee to companies that don't labor under the same restrictions.

Those who defend such practices as being a business necessity are blowing smoke. N company 'needs' to have a sales conference at a Four Seasons (not even the Four Seasons itself). No company 'needs' their employees to have access to private jets. No company 'needs' to pay for the employees' lunches and dinners. And no company 'needs' pay employees $20 million bonuses.

The reason these expenditures get made is that employees (and management, to the extent they are aware of and approve these practices) can get away with it. There's a discreet arrangements between workers and their bosses: employees will take for themselves whatever they can get away with and their bosses agree to look the other way so long as such practices don't go over the top. This holds up and down the line: office workers who 'steal' time by surfing the web during office hours, by those who take office supplies home, by those who order a fancier desk than they need, by those who upgrade themselves to first class when they can get to their destination all of five seconds later if they sat in the back, by those who raid the hotel minibar and have their company pay the tab for the movies they watch while on the road, and by those who schedule company meetings in fancy and expensive places instead of a cheaper place.

And the public, being the very people who engage in such activities at their own workplaces, knows it goes on in other companies. They know employees at Wall Street firms are milking their company for company-paid dinners and entertainment, for outings at exotic hotels, for limo service to take them home after work and so on. And while ordinarily the public, being the very people who engage in such activities at their own workplaces, might not care what was going on at some other business, given that the public now OWNS these companies, they feel that they're the ones being taken advantage of... and they don't like it. And that's why there is such strong support for pay caps and forcing companies to do without their private jets and corporate outings.

Having said that, it is probably a bad idea to tie their hands too much. All things being equal, employees, especially those with talent, will always go to where the grass is greener. If a bond trader has the choice between Firm A and Firm B and Firm B pays a whole lot more than Firm A, then they're going to be working at Firm B. Over time, Firm A will be staffed by employees who aren't good enough to draw a higher offer from anywhere else and in the cutthroat world of Wall Street, 9 times out of 10, the firm with the less talented employees will find itself suffering relative to its competitors.

The public has a choice: we can demand that 'our' employees stop stealing from us but only if we're willing to see those employees depart and leave us worse off.

And yes, it is extremely hypocritical for Congress to blast these 'excessive expenditures when they themselves have long conducted their outings at very nice places. Just as no business 'needs' to hold meetings at an expensive resort, Congress doesn't 'need' to hold its outings at such places either.

* Yes, that was one long sentence.