Monday, March 23, 2009

ING Trying to Set a Good Example for AIG

Following the AIG' target=_blank>AIG (AIG) BonusGate (non)scandal, everyone in the world is wondering who’s getting paid what bonus at which bank. Dutch Bank ING Groep INV (ING), purveyor of those ever-popular high-yield savings accounts, is starting what could be a new trend in asking employees to repay bonuses.

Says the AP:

"That is why we are asking the top 1,200 (managers) to give up their bonus," he said. No bonuses were planned for this year, he said, and the group is reviewing its policy on pay packages.

This is a very savvy political move by ING. This is exactly the type of move that both governments want to see right now, and will help the company avoid public relations disasters relating to executive compensation.

Like it or not, populism is alive and well, and people want a little (a lot?) bit of flesh from the fat cats. ING is smart to give a little bit up. Don’t be surprised to see similar moves coming from US firms like Goldman Sachs (GS) and Morgan Stanley (MS). The implicit message to employees would be, “give up a few bucks for a year or two and we’ll be out of the government’s way. Then we can all get richer as the governments tries to inflate its way out of this mess.”

It’s not without precedent. When current Morgan Stanley CEO was running CSFB, he asked top people to break multiyear contracts. Given the awful Wall Street job market, many employees would surely give up some pay in exchange for something resembling increased job security.