Is Wall Street Tone Deaf?

Citigroup is reportedly planning on raising salaries to its employees by as much as 50 percent as a way to offset smaller annual bonuses. “Bonus,” as it relates to Wall Street, has become a dirty word in the media. When the stock market was crashing in late 2008 and early 2009, as the economy went into a tailspin and while millions of jobs were lost, bonuses paid to top executives and employees of financial services firms – whom many claimed touched off the crisis – seemed obscene.

It’s worth remembering that plenty of people who worked in the financial services sector have been laid off and most of them weren’t involved in the excessive risk taking that politicians and economists say occurred. Nor were most of the people who still hold jobs in that industry the geniuses who put firms such as Citigroup in a position where they needed billions of dollars in taxpayer funds to help them stay afloat last year. Plus there were widespread pay cuts for those who remained employed. In other words, much of the scorn that is heaped upon companies in businesses such banking, investment management, insurance and investment banking is misplaced.

Still, at a time when President Obama is conceding that the nation’s unemployment rate will likely exceed 10 percent before it starts to decline, here’s Citigroup, a firm that is 34 percent owned by taxpayers, devising ways it can get the bonus money to its employees just not by that name. And it isn’t alone. According to Johnson Associates, a New York compensation consulting firm, compensation industry-wide will be up 20 to 30 percent this year. Total industry pay would still be below the record levels of 2007, but that’s still a big raise.

But what’s wrong with that? One of the red flags that socially responsible investors look for is top-heavy executive compensation, while the rank-and-file share in only a small amount of the profits. These firms are trying to restore pay levels and retain their best employees.

It amounts to a PR blunder, to say the least and the impression that Wall Street firms really don’t care what’s happening with the rest of America. As an example, NBC’s Today Show did a seven-minute report on Citgroup’s raises featuring a clip from the 1980s movie “Wall Street” in which Gordon Gekko, the character played by Michael Douglas, declares “greed is good.”

The likelihood is that there are other sectors and companies within those sectors that are managing to have a pretty good year so far. Their top executives will receive healthy bonuses and their workers will get raises – perhaps in amounts some people consider outlandish. But they’ll go unnoticed because they don’t have the spotlight on them that many Wall Street companies have brought upon themselves.