“The CEO should just give up his Christmas bonus.”
That was the solution to the proposed but recently trashed $5 Bank of America debit card by a very intelligent, well-meaning and quite serious colleague. You’ve heard the story. Bank of America was going to start charging $5 to use their once free debit cards. People went nuts. They left BofA in droves. They burned their ATM cards (presumably after they closed their accounts). News to her was that “new” fee for using her debit card was courtesy of Dick Durbin (Ill-D), whose amendment to the terrible Dodd-Frank bill required banks to cap the amount they collected in transaction fees from retailers at 12 cents, down from 44 cents. Now, instead of collecting the cost indirectly from retailers banks will be forced to collect those fees by other methods*—like debit card fees, charging for checking accounts, etc.
What an outrage! These greedy, heartless bastard banks want to cover the cost of a service! What are they, in business or something?
Good lord, you wouldn’t think so according to my colleague. But the suggestion of making the CEO give up his bonus pay was her serious solution. Serious, because she kept repeating it. Probably because this meme has been making its way around long before Occupy Wall Street was just a dream in some smelly anarchist’s greasy-haired head.
I thought maybe some facts and relating it to a business with which we are both familiar might help. Since the article we were discussing was about Wells Fargo and what they stood to lose with this new regulation, roughly $1B, I used Wells’ CEO John Stumpf’s compensation figures for 2010, $17,568,387. That figure included his base salary, cash bonuses, stock and other compensation. Or, roughly, 1.8% of that $1B loss. Hm, not quite enough to cover Wells’ losses, now is it?
That didn’t matter to my colleague. “They should still take it out of his bonuses.” Even if it was his bonuses, I replied, that would only be $15M. “Still…they’re a bank they could absorb the loss.” she retorted. For a moment I thought maybe she had a point. After all, Wells has $1.2T in assets; $93B in annual revenue, maybe they could eat the loss. Then, I calculated their profit margin, 7.75%—below the the 8-10% most businesses, big or small, consider to be a sign of a healthy business.
“But why should they? They are a business. They do like, want and need to make money in order to stay in business. Why should they do it?”
So I thought I could put the loss in terms she could relate.
I gave her an example of our company. If we had to eat a $1B loss it would be more than half of our annual gross revenue. We couldn’t pass that along that loss to customers as it would drive them away and put us out of business. So we’d have to cut more than half of our staff—roughly 5000 people. Ouch. Wells employs 280,000 people, and while they probably wouldn’t have to let 5000 go—they could create new positions, re-org, etc.—many would still lose jobs. Let’s be hopeful and say around 3500. Not a lot given today’s horrid unemployment rates, but undesirable nonetheless.
Did this matter to her? I’m not sure what silence means at this point—frustration, defeat, embarrassment over her trite solution, tired of me thwarting her anti-corporate ideology, afraid to admit I had a point, or a combination of all those—it’s hard to say. But that’s what I got. Silence.
Clearly, blaming CEOs for making too much or taking away their pay is not a reasonable or thoughtful solution. So why do people like this resort to this line of rhetoric? Because they have nothing else. They’re angry; they feel helpless. Looking at the real and true causes behind our financial woes takes too much time, too much investigation, too much involvement, too much challenging of one’s long-held world view. So they cop-out and demonize the low hanging, easy to hate fruit: CEOs.
Why do I lock horns with people like this? Why can’t I just let them live their lives operating in their ideological wasteland? Because they’re smarter than I am; they went to better schools; they’re the thoughtful ones; the considerate people among us. At least they’re supposed to be. And by God they should know better.
*Oh, and retailers are not required to pass along those savings to you, Dear 2.5 Readers. A similar bill was passed in Australia in 2003 and no one “could document merchants passing savings to consumers.” Ahem, so now it’s not the banks “sticking it to you”; it’s your local grocery store, Target, the pet store, the dry cleaners….