A Goldman Board Member on the Culture of Big Bonuses | Bill George | Big Think

A Goldman Board Member on the Culture of Big Bonuses

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Bill George, a board member of Goldman Sachs, on the changing landscape of Wall Street bonuses in the wake of the economic crisis—and why government intervention is more harm than help.

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Bill George:

Bill George is professor of management practice at Harvard Business School, where he has taught leadership since 2004. He is the author of four best-selling books: 7 Lessons for Leading in Crisis, True North, Finding Your True North, and Authentic Leadership. With co-author Doug Baker he recently published True North Groups.

Mr. George is the former chairman and chief executive officer of Medtronic. He joined Medtronic in 1989 as president and chief operating officer, was chief executive officer from 1991-2001, and board chair from 1996-2002. Earlier in his career, he was a senior executive with Honeywell and Litton Industries and served in the U.S. Department of Defense.

Mr. George currently serves as director of ExxonMobil, Goldman Sachs, and the Mayo Clinic and also served on the board of Novartis and Target Corporation. He is currently a trustee of the World Economic Forum USA and Guthrie Theater and a former Trustee of Carnegie Endowment for International Peace. He has served as board chair for Allina Health System, Abbott-Northwestern Hospital, United Way of the Greater Twin Cities, and Advamed.

He was elected to the National Academy of Engineering in 2012. He has been named one of "Top 25 Business Leaders of the Past 25 Years" by PBS; "Executive of the Year-2001" by the Academy of Management; and "Director of the Year-2001-02" by the National Association of Corporate Directors. Mr. George has made frequent appearances on television and radio and his articles have appeared in Wall Street Journal, Business Week, Fortune, Harvard Business Review, and numerous publications.

Mr. George received his BSIE with high honors from Georgia Tech, his MBA with high distinction from Harvard University, where he was a Baker Scholar, and honorary PhDs from Georgia Tech, Bryant University, and University of St. Thomas. During 2002-03 he was professor at IMD International and Ecole Polytechnique in Lausanne, Switzerland, and executive-in-residence at Yale School of Management.

He and his wife Penny reside in Minneapolis, Minnesota.

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TRANSCRIPT:

Question: There was a report that shareholders were angry that such a large portion of Goldman’s profits were going to employee bonuses. As a board member, where do you stand? (Dan Indiviglio, the Atlantic Business Channel)

Bill George: I’m very concerned about the compensation issues and the public’s reaction to that. I frankly think that the public perception is a much bigger issue than the shareholder issue. I think that is a limited group of shareholders. Shareholders seem to be quite pleased with Goldman and there is a linkage between pay and performance and I think as long as we follow our principles of long term pay for long term performance then the firm is going to do well. If it gets back to play, if it goes to a short term game like Citigroup did of paying out large cash bonuses I think that would be a disaster and I don’t think you’ll see that happening. There is always a question of the amount and I think one has to look at that in relationship to the profits and I think you’ll see even that percentage coming down. It’s been very high on Wall Street, much higher than any industrial corporation that I know of, but I think those percentages need to be re-looked at and I know the Goldman board and compensation committee in particular are taking a hard look at that right now.

Question: How does this pay reflect real value added to the real economy?

Bill George: One of the statements at Medtronic mission is that employees should have a means to share in the company’s success and to me that meant a lot more than salary or wages and benefits and so what we tried to do at Medtronic was to spread the wealth around. When the company is successful everyone got stock. In fact, we made sure every employee had stock. Now it was in a restricted plan, but still, everyone had stock because we wanted them to be the beneficiaries to the extent the stock went up they benefited and we gave out, converted a lot of profitability into stocks spread broadly across the company in stock options.

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