By Mary Beth West, APR

We read with interest today’s Barron’s article on many Wall Street firms’ stubborn determination to grant lofty employee compensation packages, and in so doing, shoot their public reputations in the foot. 

While many of these firms don’t feel any necessity to care what Main Street thinks, of far greater concern to their self-interests is their ability to stem federal regulation threats as well.

That’s why it’s such a head-scratcher that these companies remain tone-deaf on how their pay decisions drive animosities among influential constituencies that have the power to make life unpleasant. 

Here’s a quick run-down of these firms’ enemies-in-the-making:

1. Other Employees:  PR 101 has always taught that employees stand as a company’s most critical – and oftentimes overlooked – audience.  In keeping with that reality, it would be interesting for these firms to survey all of their employees who are not the beneficiaries of generous pay packages to gauge their sentiments and the impact on these employees’ performance, including the resulting quality of products / services and other bottom-line costs (i.e. employee turnover, etc.).  After all, it’s not easy working on less compensated rungs of the corporate ladder for a company under such public scrutiny for excesses. 
2. Shareholders:  As stated in this Barron’s piece, it’s basically time for shareholders to take back the store and say “enough is enough” – if, in fact, they feel that way.  We’re curious why firm managements invite shareholder activism with decisions that clearly take money away from shareholders’ own returns and jeopardize a variety of long-term corporate interests.  It’s even more puzzling why many shareholders appear to stand idly by, allowing it to happen.  Of course, so much of the shareholder public is institutional that to complain would be the ultimate pot-calling-the-kettle-black. 
3. John and Jane Q. Taxpayer:  Witness last week’s Massachusetts election to see how public sentiments are going on the economy, and it’s no wonder why public outrage is also fueling reactions by enemies 4 and 5 on this list.
4. Congress:  Never shy about grandstanding and piling on to score political points, many congressional leaders and others in government ranks are handed slings and arrows on a silver platter by these companies every time large compensation pay-outs are made public.  These decision-makers have real authority to exact costly, long-term damage in the form of new regulations, taxes, fines and other penalties levied on over-generous firms.
5. The Media:  With the 24/7 capability to inform and influence all audiences on this list, the media consistently cover stories of seemingly irresponsible and out-of-touch corporate decisions – some in a balanced way that allows all perspectives to be represented, but many with a far more specific, anti-corporate agenda.  Again, so many companies put a great-big target on their foreheads with their decisions regarding pay (among other things), and for what real benefit? 

So come on – are doling out those paychecks and stock awards really worth it to these companies in the long-run?  Some will say yes . . . that even in today’s job market, it’s a necessary and value-balanced price to pay to retain high-level, high-performance employees. Plus, the ones defending the decisions are the ones getting paid.

While we advocate for companies’ rights to make their own decisions in this regard and to defend them as they will, we have to question the rationale as well as the net impact on reputation.  Corporate boards would be wise to take the issue under closer evaluation.

Tags: Barron, compensation packages, Mary Beth West, Mary Beth West Consulting, public reputation, Wall Street

This entry was posted on Tuesday, January 26th, 2010 at 11:48 am and is filed under Public Relations. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.