A thread about executive pay

Post the Great Recession (it was only called the GFC in Australia which was one of very few countries that avoided recession. Poland was another one) there was laser focus on the relationship between executive pay and bad behaviour at the banks

Reams of copy was written by journalists (including me) about the incentives that were tied to executive bonuses. It was always about rewarding the the people in the C suite (Ceo Cfo Cio Cco etc) for the size of the profits generated

There was rarely another metric used to establish the “success” of the bosses running the large banks that caused the world’s financial arteries to collapse in conniptions. Perhaps success needed to be determined by how happy customers or staff were?

Nope. So we saw the sub-prime mortgage crisis. Sub-prime is a fancy way of saying the mortgages were less than wise. “Dumb mortgages issued to people who were highly unlikely to ever be able to repay” eg. Unemployed people.

Thousands upon thousands of these dumb mortgages were issued around the world - in the US but also in places like Ireland in Europe. The dumb mortgages were gathered up so rather than have one $100k loan you’d have say 200 of them = $2million worth

Suddenly there was a fancy “financial product” that could be sold to investors. These were called CDOs - collateralised debt obligations

That $2million was hives off in small increments to “investors” who didn’t really understand the house of cards that was supporting these CDOs

Every time these things were sold, people made money and their “investment” banking divisions swelled. Profits were made (remember what these “products” actually were) and executive bonuses were “earned”

By April 2009, when all of this was well understood, Barack Obama made his first overseas trip as President. It was the G20 Summit in London. I was The Europe Correspondent during the Great Recession. I was there

It was the biggest press conference I had and have ever witnessed. There were 1500 journalists in that room. These were the most senior reporters in the world. I put my hand up and felt fortunate enough to ask a question of the man of that moment

I asked whether it might be time to legislate against tying executive salaries to profits. President Obama squibbed it. He was on a high. He could have made a difference then, at least in principle. He said he was satisfied with self regulation of executive pay

That press conference is here

https://www.americanrhetoric.com/speeches/barackobama/barackobamag20summitpressconference.htm

The world’s leaders have been sliding this issue for 12 years. In my view, we need to find a way to tie executive rewards to customer and staff satisfaction

“skirting” not “sliding” #bloodyauto(in)correct