Wall Street is walking around with its hands over its collective crotch. (Yeah, it’s a guy world.)
But the salary circumcision President Obama ordered this week wasn’t inevitable.
The populist revolt was obvious from the moment the Fed opened the emergency discount window to non-banks—for the first time since the Depression.
That’s how people are feeling about Wall Street: Screw them big time, even if it means screwing me. And the busboy.
And the rage against excessive compensation kept intensifying during the presidential election: If Goldman and Morgan Stanley are desperate enough to need taxpayer money, the feeling was, then the taxpayers should get to approve their salaries.
But had the financial firms let even the faintest rustle of this reality into their hermetic hideaways—if they had any sensitivity to the tuning fork of the American mind—they could have taken some immediate steps to prevent the backlash.
Why were they so oblivious? After all, they pay millions of dollars in PR fees every year to heavyweights like Burson-Marsteller, Ruder Finn, and Robinson Lerer & Montgomery for ostensibly smart outside advice.
One reason is what psychologists call the overconfidence effect, which is a polite term for arrogance. It’s the same trap that led Wall Street into the mess—people put too much stock in their judgments.
I believe most of the fantastically well-compensated execs (and I use “fantastic” in its true sense) believed that this storm, grim and battering as it is, would pass. And that the perks, privilege and Pérignon would flow on.
If their sense of reality hadn’t been foreclosed, here are some things they could have done.
Announce a New Salary Equity Program
Every TARP-guzzling firm should have immediately frozen all salaries and bonuses in a very public announcement.
Such a move would have been a PR win, and it also would have been an opportunity to make clear that thousands of productive, fairly compensated employees were not involved in the carnival of crimes.
For example, Citigroup could have announced a company-wide effort to separate those who were directly complicit and those who were hard at work making loans to students and mall businesses, providing start-ups with access to capital, and working on value-creating mergers and acquisitions.
Their compensation would then have been unfrozen, creating a precedent for a case-by-case salary analysis, rather than the current blanket cap.
Use Your Employees to Rescue Homeowners
Imagine how smart and effective it would have been for Merrill Lynch to create a massive employee volunteer effort—a consumer bailout of their own.
The centerpiece: a public-service web platform to connect the expertise of thousands of their employees with desperate consumers who need help in debt counseling, foreclosure avoidance, job coaching, and other urgent demands.
Establish a Public Board Seat
Creating a board seat to represent consumers—Joe the Plumber meets Mr. Smith Goes to Washington—would have brought transparency to the mahoganied confines of the boardroom.
The whole process could have been a joyful PR interlude, replacing the current grind of grimness. Here’s the sequence: Bank of America announces the initiative, and starts by asking consumer-advocacy groups like the Corporate Library for nominations.
Next, a vote is conducted among shareholders, all done with full visibility on the web.
The election of the first public board member is greeted by a flurry of media fawning, all of it celebrating a new openness and democratization.
Bring Lobbying Out of the Creepy, Dark Places
Instead of forcing us to dig through forests of public filings to find out who’s lobbying who, every company getting a bailout should have put a prominent link on its website that lists the name of all lobbying firms they’ve engaged; how much they’re getting paid; and who they’re lobbying and what the issues are.
It would have been a simple, pre-emptive strike. Now the banks are on the defensive, forced to react as reporters and legislators point in frenzied horror at the fact that bailout recipients are still employing lobbyists.
Make Your Philanthropy Come Alive
Most bailout recipients are substantial contributors to the arts, health care, and other worthy groups. Greater awareness of that would soften their carapace of greed.
But this eleemosynary impulse is known only to the crowd that’s philanthropy-aware, who reads the benefactor list at the Met’s production of L’elisir d’amore.
The PR teams of the TARP imbibers should have spent the last 12 months on an urgent mission to get this message out there more broadly, focusing on the populist hordes who are breaching the fortresses of plenty.
The crippled giants should also be extending their philanthropy to a street-eye level. Where is the Goldman Sachs Music Education Program in struggling NYC schools? Where is the Merrill Lynch Single-Mom Job-Training Program?
These are low-cost fury neutralizers—and more demotic than the artsy-fartsy stuff that financial bigwigs usually fund; their charities are often more about networking and access than broad, Gatesian impact.
Shift the Dialogue, Implicate Others
It’s a classic but effective PR ploy: Spread the wrath. In this case, their PR flaks should have turned reporters to the dozens of examples of corporate welfare where—for decades—taxpayers have picking up the tab for the wealthy.
Take General Electric. CEO Jeffrey Immelt raked in nearly $20 million in 2007 compensation, at the same time as the government extended $1.44 billion in long-term loan guarantees to GE through its Export-Import Bank.
And what about Archer-Daniels-Midland CEO Patricia Woertz, who walked away with $17 million in 2008? According to the Cato Institute: “Thanks to federal protection of the domestic sugar industry, ethanol subsidies, subsidized grain exports, and various other programs, ADM has cost the American economy billions of dollars since 1980 and has indirectly cost Americans tens of billions of dollars in higher prices and higher taxes over that same period.”
The message: Stop picking on Wall Street.
Would any of this have made a difference? I think it could have shifted some sentiment, given Obama pause, and offered some ammunition to those who are worried about the economic impact of this pitchforks-in-the-street reaction (The Daily Beast’s Charlie Gasparino being one of them).
Right now, there is a struggle going on in America between the Busboy Argument and the Ultimatum Game.
The Busboy Argument is rational. When people earn less, they spend less—including fancy meals—and everyone suffers.
The Ultimatum Game is a logic-busting experiment beloved by behavioral economics. It works like this: Person A is given an amount of money to divide up equally. If Person B accepts the allocation, each gets their share. If Person B rejects it, nobody gets anything.
Research shows that time and again, if Person B thinks the split is unfair, and they’re getting screwed, the allocation is rejected—even though it means nobody gets nothing.
That’s how people are feeling about Wall Street: Screw them big time, even if it means screwing me. And the busboy.
That’s where we are right now. The PR and image-management cluelessness of Wall Street has turned this into the ultimate Ultimatum Game.
And populist wrath means that everybody loses.
Adam Hanft is a decoder of the consumer culture and our branded planet. He blogs for The Huffington Post and FastCompany.com. He is also the co-author of Dictionary of the Future and is founder and CEO of the marketing and branding firm Hanft Raboy.
