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A few weeks ago I appeared on CNBC's Closing Bell with Maria Bartiromo to discuss executive pay. One interesting point in the interview was when Ms. Bartiromo argued that it would be difficult to get good people to run big banks if their pay was limited because Wall Streeters are motivated primarily by money. I suggested that if that were true, then you would never see a former CEO of Goldman Sachs Group, Inc. (NYSE: GS) take the enormous pay cut required to become Treasury Secretary.
I am not sure what motivates Wall Streeters to take those pay cuts. But today, another prominent one -- Steve Rattner with whom I worked in the 2004 presidential campaign -- announced he is leaving his private equity firm, Quadrangle Group, and shipping off to Washington to work as Counselor to the Secretary (of the Treasury).
What will that mean? According to the New York Times, "In that capacity, he will advise Secretary Timothy Geithner regarding a variety of economic and financial matters and will lead the team advising Secretary Geithner and National Economic Council Director Lawrence Summers on the automobile sector."
Rattner is a very capable individual who is clearly giving up money to get something else. I am not sure what is motivating him -- he had been rumored to be a candidate for Car Czar before that position was eliminated. Maybe he sees that Washington is going to be where the action is for the next several years. And he wants to be in the driver's seat of the automotive industry restructuring process. With all the competing interests involved in that process, he probably won't be driving -- but he'll help navigate.
Let's hope that Rattner's move begins a flow of talent from Wall Street to Washington. Given the enormity of the challenges facing this country, it needs all the help it can get.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He has no financial interest in the securities mentioned.
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Reader Comments (Page 1 of 1)
2-23-2009 @ 6:53PM
Kevin said...
Why doesn't the government invest into healthcare companies instead? They have administrative costs of 30 percent or more in comparison to Medicare which has 1-5 percent administrative cost. The government could cut medical costs by 30-40 percent a year for most americans.
2-23-2009 @ 7:05PM
Dan Barnett said...
The answer is the same as why good lawyers become Federal Judges at 10% of the money they could make elsewhere; there is ALOT of ego involved in being a Federal Judge or Counselor to the President. Same holds true for Congressmen & Senators. Not all compensation is monetary.
I'll disagree with the "Money Honey". Wall Street is motovated by ego. Money is just a good measuring stick.
2-23-2009 @ 7:12PM
Tim said...
You forget that it's also a function of power, not just money. Moreover, it is also a function of post-washington career and its money machine.
2-23-2009 @ 7:56PM
MatWith1T said...
Rattner knows a good thing when he's got it - 4 years with the Obama administration is more job security than anyone on Wall St. can count on...
2-23-2009 @ 11:32PM
Iridium said...
Hell pay me $400k to run any major corporation. It's all I would ever need and I'll do a better job than anyone.
That is really the point. Past a certain ammount you really do not need any more money. It just becomes a game to be a few notches higher on the Forbes list.
Ego and self love drives executive pay.
2-23-2009 @ 11:42PM
shelleyxjr22 said...
Rattner and Geithner working side by side in Washington? I don't know bout that. Once a Wall Streeter pimp, always a Wall Streeter pimp.
Good thing the Obama's didn't sell their house in Chicago. After these two get together. The White House may need to go up for sale, or at the very least turned in to a B & B to continue funding all these bail outs. Cause the tax payers sure cant continue paying all the bail out bills.
2-24-2009 @ 8:07AM
Judy Lynn Ferguson said...
GREED, GREED, GREED! Wall Street has been on Capitol Hill for years nothing is new. However your Congressional Leaders will not be able to collect campaign contributions from our Bailout money called TARP. Wall Streeters are angry because the Lobbyist and Special Interest Groups have been put on hold by our newly elected President.
2-24-2009 @ 9:31AM
BHarrison said...
Prhaps, with Wall Street in disarray, these rather egotistical Wall Street "power brokers" see more opportunity for their futures in Washington.
And with the fraud and corruption in government and government agencies, who is to say what potential "hidden opportunities for "addidtional 'compensations'" these government agencies may provide. Cick Cheney's position of Vice President certainly appeared to help Halliburton substantially . . . who knows what "round about" "compensations" Cheney may receive in the long run?
How much "compensations" do Congressmen receive in addition to their Congressional "salaries"? Aren't Congressmen allowed to keep the balance in their political campaign funds when they "retire" from politics?
These Wall Streeters and Congressmen are extremely astute and "creative" when it comes to enhancing their salaries via other means. Personally, I consider 70% to 90% of them to be "legal crooks" . . . because they draft the legislation/laws to benefit themselves above everything else.