Jeffrey Sonnenfeld, the Lester Crown Professor of Management Practice at Yale, is the Senior Associate Dean of the Yale School of Management. He is also a member of the board of directors of TheStreet.com, which publishes this Web site.
In today's House Financial Services Committee hearings, the contrite CEOs of financial institutions were drilled repeatedly by legislators over the lush payouts given to the lieutenants of these financial titans just weeks ago.
Occasionally, professors hear, "If you are so smart, why aren't you rich?" To which professors covertly retort, "If you are so rich, why aren't you smart?"
This false link between salary and intelligence, or creativity and intelligence, is at the heart of the debate over President Obama's bold proposal to cap the salaries of the leaders of firms receiving massive taxpayer bailouts so their companies can stay alive. Apparently many who believe that Gordon Gekko's "greed is good" mantra fear that salary caps will extinguish the presumably priceless spark of innovation in Wall Street. This, despite the tragedy that the failure of many of the brilliant new instruments has wiped out much of their presumed legacy -- along with our economy.Widespread outrage followed reports that billions of dollars in bonuses were paid to pampered fallen Wall Streeters by already beleaguered Mainstreeters across the nation. In fact, the CEO of distressed Merrill Lynch used such support for more than $1 million in office décor, $240,000 salary for his limo driver, and a rushed payment of $5 billion in bonuses to his lieutenants on the eve of its takeover by Bank of America (BAC). His failed predecessor left a year earlier with $200 million in exit payments, while competitors paid executives $50 million and $60 million apiece in normal annual compensation, only to beg for public life support a year later.
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