Expert Perspective by Grahall’s OmniMedia Editorial Board
After all the dire predictions of the exodus of top talent from TARPS firms, Eric Dash says in his article for the Wall Street Journal March 22, 2010 (Few Fled Companies Constrained by Pay Limits): “New data… suggests the departures were more of a trickle than a flood. Of the 104 senior executives whose pay was set by the federal pay regulator in the last two years, 88 executives, or nearly 85 percent, are still with the companies even though their pay was drastically cut back, according to people briefed on the government data.”
One hopes that those who remain are the ones best suited to lead the company in the future. We sincerely doubt that these 85% who remain are the “losers” who couldn’t find another job. We think that the fear was overblown, perhaps intentionally, in the hopes that the risk of losing key talent would keep Fienberg from slicing too deeply into executives’ pay.
It is important to remember that the question “should I stay or should I go?” is influenced by many factors. As Dash puts it, “…relative stability, at least within the executive suite, suggests that a soft job market, corporate loyalty and personal pride helped deter the feared management exodus at the companies hardest hit by the pay rules.”
We hope that these men and women also demonstrate a sense of responsibility to right these corporate ships that they have so badly steered. We know they share an understanding of the accumulated wealth equation. This equation holds that executive positions are “sticky” when the individuals who hold them have accumulated potential wealth in the form of pension accruals, unvested stock options and other “future” remuneration. In good economic times, lavish sign-on bonuses and contracts can overcome this “stickiness.” But when times are more difficult and these large bonuses are not proffered, executives may be wise to stay put.
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