By Brian | January 20, 2012 | Share on Facebook
I promised myself when I started blogging again that I’d stay away from overtly political posts, but I saw a couple of articles in the news lately that I found interesting in various ways, so I thought I’d share:
BP Makes Amends
When the oil spill first occurred back in April of 2010, environmentalists claimed the damage could last for years, if not decades. Economists predicted economic doom for the Gulf region, already damaged by past hurricanes and other natural disasters. But now, less than two years later, we read this in the New York Times:
BP has performed quite admirably in [the] aftermath. It has spared no expense in cleaning up the oil. It has set aside $1 billion to restore the environment and coastal ecosystem. It underwrote an advertising campaign to lure tourists back to the Gulf Coast. Today, less than two years after the spill, the beaches are sparkling, most fishermen are working and many of the hotels are full.
At the urging of President Obama, BP also agreed to set up a $20 billion fund to compensate anyone who could show that they’d been economically harmed by the accident. Ken Feinberg, the former administrator of the Sept. 11 victim compensation fund, was put in charge of the Gulf Coast Claims Facility, as it was named. Feinberg has since paid out $6.3 billion to nearly 200,000 claimants. Daniel Becnel, a lawyer who has settled thousands of claims, says that his clients often receive more money from Feinberg than they would have if they had gone to court. “You couldn’t have done a better job than Feinberg did,” says Becnel.
So kudos all around. BP, the corporate villain who was accused of caring more about profits than people, has done the right thing. Our government stepped in to help and actually made the process more effective and efficient than it otherwise would have been. And the people of the Gulf Coast worked hard, rebuilt, and are now reaping the benefits – despite a continuing tough economy.
The widening pay gap on Wall Street
We read all the time about big Wall Street bonuses and how those rich bankers take every opportunity to reward themselves with sky-high bonuses while “the 99%” suffer. But here’s a pretty clear depiction of how the financial crisis affected Wall Street firms:
Now, before everyone jumps all over me, I’m not suggesting that $128,000 is a small amount of money, or that the average Wall Street worker is suffering. But it is noteworthy that the average bonus dropped 44% when the crisis hit, and is still 28% below pre-crisis levels. And, according to the article, the 2011 bonuses will likely average $77,000-$90,000 (a 30-40% drop from 2010), or less than the immediate post-crisis figures of 2008. Again: my point is not to launch a telethon for the poor Wall Street bankers, or to suggest that someone making a base salary plus a $90,000 bonus deserves any kind of pity. Instead, I think it’s interesting to note that the industry does police itself pretty effectively when it comes to compensation, despite the lack of any major regulations requiring them to do so.
As an aside: the article attempts to call out Wall Street firms for paying their “top performers” higher bonuses than everyone else. Anyone who’s ever worked in a meritocracy realizes how hollow this criticism rings. Whatever the bonus pool – down 30-40% or up 30-40%, one should always expect the larger share to go to the strongest performers. That is, after all, why they call it “incentive compensation.” In a base+bonus pay model, a prominent reason for putting some portion of the pay “at risk” is to allow companies to reward strong performers relative to weaker ones. And, in a down year like 2011, I don’t think a reward of “same as last year” is overly excessive for those performing at the peak.