Are Bankers Undercompensated?

In: Business and Management

Submitted By stefanozyngier
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Are Bankers Undercompensated?

The general public, more often than not, has the impression that bankers are the evil seed in the macro corporate environment. So, we need to ask ourselves, why? This notion is primarily based on the fact that “our economy is only as good as our banks,” therefore, CEOs are responsible for the country’s economic performance. Secondly, one of a bank’s many roles is to take care of people’s accounts, thus, in time of crises it is easy for individuals to make them liable for their uncomfortable financial position. Additionally, it is needles to say that these top executives are public figures, making it easy for people to put a name and face as the target of their dissatisfaction. Finally, in order for us to evaluate their compensation we need to draw a parallel between their performance as CEOs and their salary (including bonus), as well as compare them to CEOs in other industries. To assess performance, take into consideration that a country’s GDP is broken-down into four components: personal consumption expenditure, which is further broken down into goods and services; business investment; government spending; and net exports of goods and services. With the greatest US GDP contributor being personal consumption expenditure, services alone accounted for 46% of what the nation produced in 2011; and, the banking industry falls into that category. Moreover, if you take a look at exhibit1, which shows a further detailed breakdown of the US’s GDP in 2009 – when we engaged in a bull market – the finance, insurance, real estate, rental, and leasing sector represented 21.5% of the country’s output. This goes to prove that whether bankers are undercompensated or not, they are indeed the top performers and the driving force in this country’s economy. In order to draw a parallel to exhibit1, lets look at the compensation for CEOs in 2009 as…...

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