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segunda-feira, maio 04, 2009

Article: Why Bankers Would Rather Work for $0.00 Than $500K

Why Bankers Would Rather Work for $0.00 Than $500K

Sometimes asking someone to do something for nothing is more powerful than

paying them.

In a research paper entitled "Effort for Payment: A Tale of TwoMarkets,"

James Heyman and I that people are willing to help move acouch or perform

an experiment just by being asked. Moreover, theseindividuals feel good

about their "gift". Most interestingly, theexperiments show that contrary

to standard economic theory, paying asmall incremental incentive does not

increase effort, but actuallylowers it — because meager compensation

profanes the gift effect anddisincents the giver.

Bringing money into the relationship takes the giver's work out of"gift"

market, and brings it into the "pay-for-effort" market. When itwas done for

nothing, the protagonist was a "donor." When small moneywas on the table,

he or she became an underpaid employee. The easiestway to think about this

is to imagine if at the end of Thanksgivingdinner you asked your

mother-in-law how much you owed her for cookingsuch a wonderful meal. Would

that increase or decrease her effort thenext time you came by? (Assuming,

of course, she would still inviteback you after such an insult.)

In this financial crisis, there has been much discussion aboutbanker' s

pay. We think that if President Obama had asked for a group ofbankers to

take $0, and paid expenses only, it would have brought thediscussion back

into the gift economy. $500,000 is just low enough tobruise the banker's

egos (after all, they got used to much highersalaries for a long time,

higher salaries we can be pretty certain theyfeel they deserved), but $0 is

something to be proud of! In fact,paying these CEOs nothing might remind

them about the responsibilitythey have to the banks they are leading and to

the rest of society. TheCEO of AIG Ed Liddy is already only taking a

one-dollar salary anddonating his time to this worthy effort. But his gift

is isolated, adrop in the bucket — not part of an overall "corps" of senior

financialexecutives acting in unison to help fix the mess.

Would the best people be willing to work for free? Not all capablebankers

could afford it, but many could. We think there would be manywilling to

pitch in…if asked in the right way. After all, this giftidea was at the

core of John F. Kennedy's brilliant notion, "Ask notwhat your country can

do for you — ask what you can do for yourcountry. " By eliminating pay

altogether, these leaders would be givingthe nation the donation of their

time and skill, improving their levelof motivation. Instead of accusing

them of being greedy and selfinterested, people could see them as important

actors playing key rolesin the stability of our entire economy. This in

turn would probablyencourage more bankers to see the power of a collective

gift and thejoy they could feel in donating something so important.

As it stands now, the many good people who are trying to improvethings for

little or no pay are isolated, their effort drowned out bythe outrage over

bonuses and salaries. Hence we have the Congress andPresident involved in

legislating the level of executive compensationall the way down to its

structure and timing! Congress should not bemired in the details of

compensation design. Not only are they bad atit, but the beleaguered public

— whose median household income is lessthan 1/10th of $500,000 — is

watching the pay ping pong with collectivedisgust. The knee-jerk reaction

to create a confiscatory 90% tax on theAIG bonuses makes the conservatives

among us think we are killingcapitalism itself.

When individuals commit acts of personal generosity, it sparks agift

culture that replenishes a store of trust — a resource asmultiplicative as

any Keynesian monetary policy. This sharing is notdone in a communist,

carving-up-the- spoils manner, but rather in thetradition of bravery and

sacrifice for our collective benefit. Whenthose in power act within a gift

culture guided by a spirit ofgenerosity for common cause, it creates a

tangible trust asset thatsupports the flow of credit, money, and markets.

By focusing onlimiting executive pay, President Obama did the political

equivalent ofasking his mother-in-law how much he owed her for Thanksgiving

dinner —and moved the discussion away from social responsibility, and into

thepay-for-effort market, where the negotiations for spoils now dominatethe


We think our bold young President has to improve his request. A giftculture

— created at the top — will benefit all of us; and, strangely,will also

help strengthen the rapacious markets where self-interestreigns supreme.

The good news is, it's not too late.

By John Sviokla and Dan Ariely

source: http://www.technolo gyreview. com/blog/ post.aspx?


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