A recent item in the Wall Street Journal talked about how British banks are pushing back against any sort of regulation on pay practices, saying that such regulation “will harm competitiveness, as jobs and tax revenues move to friendlier climates.” Wall Street banks are saying the exact same thing to Washington. My question is: where exactly are they going to move? Is the talent going to run to Bear Stearns or Lehman? Clearly not. After all the recent layoffs, there are fleets of unemployed bankers ready to replace anyone on a trading desk. But maybe the talent will move offshore, to Paris or Zurich or Tokyo – any place that doesn’t limit compensation. Really? They are going to take their kids out of Greenwich Country Day School, quit the country club, and move around the world? Some will, sure, but the majority won’t. The uproar from kids and spouses alone will force most of them to stay put. For those without families, I would think that the concept of living in a social democratic country makes moving a non-starter.
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This isn’t really about pay. It’s about accountability. These guys have come to look at their salaries as entitlements rather than compensation for work done on behalf of investors. It’s investors who need to step up and say no more to plundering by employees (often shareholders themselves, but not in good faith if they think they need to take all of their money out of the bank).