By Dan Nelson
Provided by 
Everyone with a stake in the banking industry (and that means everyone) is looking for a solution or a fix for all of the recent troubles — from poor lending standards to consumer-friendly products.
But that around-the-corner solution may be pushed off by a catch-22. Recent reports claim that a few of the America's largest (and most hindered) companies could be hit with an impediment to recovery.
Here’s the catch: Top banks need top talent and top talent demands top pay.
A current proposal to cut up to 90% of pay for top level bank executives will have bank executives at the affected institutions heading for the exits. While you can never be sure in this environment, there are likely lucrative incentives to be had elsewhere at healthier banks where a good book of business costs a lot to acquire.
Although this cut has not yet been officially announced, some details to emerge include salary limits of $500,000 for top executives and more stock compensation to encourage long-term results.
The cuts will apply to the 25 highest paid executives at the seven companies that received the most assistance. These companies include: Bank of America, America International Group (AIG), Citigroup, Chrysler and Chrysler Financial, General Motors and GMAC. Just last month, Ken Lewis, the outgoing CEO of Bank of America, agreed to forego his 2009 salary of $1.5 million as well as any bonus and other payments. (Don't worry for Lewis, he’s still slated to get $125 million out the door.)
Although unemployment across the United States stands at roughly 10%, you can be sure there are still job openings for some of the highest-level financial management positions. Clearly hedge funds and competing banks (not in hock to the feds) will be able to dangle incentive figures to top management and the struggling banks will be have no way to match.
If some of our largest financial institution and two automakers are to repay their TARP money and become profitable again, it will certainly take more than mediocre management to achieve this.
And as capitalism will have it: top talent demands top pay.
Read the original family finance article on FiLife: http://www.filife.com/stories/pay-cuts-to-hurt-banks-more-than-help
