Courtesy of Pam Martens.
Margaret Heffernan, Author of “Willful Blindness,” Speaking at the Finance & Society Conference
Stanley Fischer, the Vice Chairman of the Federal Reserve, was seated in the audience when author and consultant, Margaret Heffernan, dropped her bombshell at the “Finance & Society” conference on May 6 of this year. The conference panel was themed “Other People’s Money: Governance, Integrity, & Ethics” and Heffernan fired the equivalent of a heat-seeking missile through one of Wall Street’s biggest lies: that there is a legitimate basis for the obscene pay of its CEOs and traders.
Heffernan told the audience:
“There’s another assumption in this which is performance-related pay is going to make people do a better job. This is not substantiated by the research. It just isn’t…I can find proof that it will make people run a little bit harder for about 15 minutes, but I can’t find the proof that over the long term, over time, it really delivers better work from more qualified people. But this has been a truism in all capitalist societies for a very long time. And it’s about time we started questioning some of these shibboleths because I would say that not only does performance-related pay not deliver superior results, I would say it almost guarantees inferior results because it encourages, incentivizes really some very perverse decision making.” (See Heffernan’s extended comments on video below.)
Stanley Fischer is someone with more than just a casual familiarity with that subject matter. Fischer is a former Vice Chairman at Citigroup, a bank that became insolvent in 2008 and required the largest taxpayer bailout in U.S. history. That was after it had paid almost $1 billion in compensation and stock awards to its former Chairman and CEO, Sandy Weill, and a severance package of $32 million to Jack Grubman, a corrupted stock analyst who was barred from the securities industry for life for issuing fraudulent research to the public to seduce them into buying dog stocks.
If one wants to study “perverse decision making,” there is no better case study than Citigroup. Last week the bank became an admitted felon for conspiring with other banks to rig foreign currency trading. This week one of its former Libor interest rate traders is on trial in London for rigging that market.
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