About a year ago we looked at Wall Street’s approach to retaining top talent through outsized compensation packages.  Consider this the latest installment in that saga.  The most recent news is that CEO and C-level executive compensation took a large cut last year, while the traders and money managers received the largest collective payout in history.   The bosses took the bullet (public outcry, congressional hearings, pay czar scrutiny, etc.) in order to keep the restive troops from jumping ship.

CEO pay at 18 financial companies was down 30%.  No surprises there–they are under lots of pressure from the public and the media.  At the same time, 38 financial service firms on Wall Street paid a collective $140 billion in compensation and benefits, a record number, and up from $123 billion in 2008 and the previous high-water mark of $137 billion in 2007.  What does this all tell us?

Two things:  Wall Street’s approach to compensating top talent has not changed, even as headlines seem to imply that executive compensation is down.  CEO pay may be down, but the all-out effort to retain top talent among traders, money managers and top analysts is still calculated in the simple formula of  more dollars=stay for another day.  The other point is a reflection on leadership.  The top leader (CEO) is a lightning rod for criticism, and they have to take the hit when emotions are stirred.  I expect that these CEO’s are still not going to be hurt too much.  Make-up compensation and deferred bonuses can be paid out at other times and in other ways once the public glare focuses elsewhere.

A real sign of leadership would be finding innovative ways to reward performance, manage risk and produce sustainable results.  Without leadership, you’re simply managing mercenaries and the only obvious solution is to throw ever-increasing amounts of money to the troops.