One of the dangers of excessive pay is that it tempts CEOs to think that maybe they really are god-like superheroes. But few have actually boasted about the role like Goldman Sachs’ s Lloyd Blankfein.
It has been a consistent view of these pages, and one much longer voiced by its author over some two decades, that executive compensation poses a number of systemic risks to companies, to the institution of capitalism and to society generally. One of those risks, the effects of which is being experienced in the economic slowdown today, is that stratospheric compensation tends to distort how CEOs view the world and tempts them to venture into unwise and perilous territory (see, for instance, 40-to-1 debt leverage; unbooked credit default swaps and subprime mortgages). Some are inclined to believe that they truly are the god-like superheroes they would have to be in order to justify pay levels that swell into the high tens of millions on a regular basis. Now, we have additional proof for our theory.
Earlier this week, the Times of London reported Goldman Sachs CEO Lloyd Blankfein, whose compensation in 2007 amounted to more than $70 million, as saying that he was doing “God’s work.” Goldman has always been filled with heavy-hitters who go on to exercise considerable sway in government (see Henry M. Paulson Jr.). It seems the influence has taken on a decidedly out-of-the-beltway, even out-of-this earth, tone.
It is difficult enough for Goldman to justify the compensation it regularly doles out. To add to that PR nightmare by taking on the role of an emissary from God may prove to be more than even this fabled company can pull off. Such talk only serves to divide Wall Street from Main Street further at the very time when public confidence in America’s financial institutions, and respect for its captains, still remains fragile.
Paying millions to a CEO like Mr. Blankfein, or any number of his contemporaries, can get you, well, a very highly paid CEO. But can it get you a leader who personifies both common sense and good judgment and is able to avoid making stupid statements that cause him and his company to be the laughing stock of late-night comedians and op-ed page commentators? That is the question, rather less for heaven than for earth, where the generous American taxpayer, and not Divine providence, is most responsible for placing Goldman Sachs, and the Wall Street economy it depends upon for its success, back on track.