Public opinion may have won out this week, as large financial corporations that have been bailed out by TARP shy away from awarding large end-of-year bonuses to their employees this year. Goldman Sachs announced today that 30 of its top executives will receive no year-end bonuses, but instead will be given stock options which cannot be sold for at least five years.
Recognition of Taxpayer Assistance
According to an December 9th interview with Goldman Sachs boardmember William George, the move was in part done to ameliorate some of the anger directed at the company, and to “moderate things and to recognize that Goldman and every other firm benefited from the actions of the Federal Reserve Board and the Treasury Department.” However, other experts have cautioned that restrictions on salaries and bonuses such as those enforced by the pay czar could simply cause the top talent to leave, perhaps even seeking employment overseas if the limits become a federal law.
A Bloomberg National Poll stated that while financial institutions may be recovering, their standing in the eyes of the public is not. With the economy at large not showing as much recovery as the financial industry, and unemployment still hovering around 10%, people are not showing much sympathy for executive bonuses. Two-thirds of Americans polled said they had an unfavorable opinion of financial executives, and 75% of those polled said that banks that accepted bailout funds should not award bonuses this year.
Wary of Public Opinion
The fact that these companies are unwilling to use bailout funds to award bonuses demonstrates that to some extent, Wall Street has started to pay a little more attention to public opinion. After being subject to government pay caps and other regulations that came from accepting TARP funds, large financial institutions are no longer able to act with the same impunity that they did before the recession.
These companies, which before did not need to worry about the consequences of their actions, now have to be sure that they remain under Congressional radar, and this means that they have to also please the constituencies of the lawmakers that have increased power over their actions. However, as more of these institutions buy their way out of TARP regulations, we have to wait and see if these lessons are lasting.