Jake DeSantis very publicly resigned from AIG today, and his missive to CEO Edward Liddy provides interesting insight into the mindset of executives at our financial institutions.
DeSantis is indignant at his treatment by, well, just about everyone involved in the AIG mess. He has reason to be--he was made reasonable promises and those promises have not only been broken, he and others have been demonized for ever having been made those promises in the first place.
Let's start with the defense: DeSantis and his colleagues agreed to work for $1 a year--$1!--to stick around and help unwind the AIG-FP business. How many of you have agreed to a $1 annual salary? Not many. In return, he was promised the same bonus payment he got the year before. OK, that prior year bonus was probably one of the bigger ones he's ever received, and not necessarily reflective of what it would really take to retain him for another year. But it was a deal, and in the context of over a decade of traders and the like receiving gobs of money without so much as a whimper of protest from the American public, probably made a lot of sense a year ago.
DeSantis goes on to make it clear that he had nothing to do with those evil credit default swaps that killed the company. That only a handful of people, who have since skulked off into the night, did it, and he's taking the blame. His indignation and sense of injustice ("none of us should be cheated of our payments") is palpable. The populist backlash that is throwing him out with the bathwater is too much to bear. And let's face it, our Congressional representatives, with their finely honed abilities to make a big show out of closing the doors of long-empty barns, aren't helping anything.
Now I have two problems with all this. First, DeSantis was paid $742,006.40 after taxes. In his mind, he generated a lot of profit for AIG, and he deserves his cut. How many of us get a "cut" of our employer's revenues? That's the problem right there. The financial industry has created this culture of entitlement to a cut of our earnings. They gamble with our money and then they get a cut. Sometimes they get a couple of cuts. Lots of people get stock options and that is sort of a cut of the success of your employer, but AIG execs got those too--a triple cut! Let the financial firms shower stock options on these folks and then at least the people who invest in and with those firms will benefit along with the employees who helped make it happen.
DeSantis seems completely oblivious to the fact that people are finally questioning the wisdom of paying these people enormous amounts of money for making bets on the success or failure of other people's hard work.
I'm not joining the populist wave and crying "off with their heads." But I am saying that this BS about paying enormous, "cut of the winnings"-based bonuses being the only way to attract "the best and the brightest" is wrong. It may attract a certain type of the bright kids, and some of the best, but certainly not all, or even most. Most of the best and brightest still go off to create things not money, or help people, or heal people, or lead people. Until the financial industry wakes up from this dream that has turned into a nightmare and realizes that it is a professional services business, one that should pay its own best and brightest quite well, not obscenely well, it's going to be vilified. [Update: Seth Godin framed this in terms of the firms failing to market their jobs on any basis other than salary, worth the read.]
Second, the finger-pointing is unbecoming. Sure the swaps were the proximate cause of the crash at AIG, but DeSantis was as much a part of the culture that set up the conditions for such a crash as anyone else. Maybe DeSantis was a cautious, prudent trader, maybe he just got lucky, I don't know. But He certainly wasn't running for less-green pastures when the CDS's were racking up the profits, was he? He wasn't writing Op-Ed pieces decrying the system that saw the complexity and risk in the system spiral out of control? Hey, he's just an average Joe "best and brightest" guy being paid over $1 million a year in bonuses, how's he supposed to figure this stuff out?
It's nice that DeSantis is contributing his bonus to charity. Personally I think he should keep it; he clearly believes he deserves it. I think Congress should shut up about the bonuses, say "we f**ked up, next time we'll know better" and fix some real problems. And I think we should all think long and hard about what kind of financial institutions we want to rebuild and give our money to when this is all over.