Wells Fargo worker asks CEO for raise in email, CC'ing hundreds of thousands

[Togo]

How are you calculating either of their replacement costs?

Well for the author, there is a competitive market for determining what an employee similar to him would cost. There is a hiring market, you can work out his qualifications and put a price tag on it.

You think if the BoD thought they could get a better CEO cheaper they wouldn't do it? Boards fire CEOs all the time.

But not on the grounds that their wages are too high. I'd ask you to find a single example of that for any bank in the Western world.

If nothing else, pay is approved by the Board. If the Board got rid of a sitting CEO on the grounds that they had approved too big a wage packet for him, then there would legal implications. No, in practice CEOs are never fired on the grounds of cost.

I did witness a president getting fired on the grounds of cost, but that was for a non-profit foundation, and the entire post was eliminated (i.e. they didn't replace them with someone cheaper).

The reality is that any numbers we can specify as replacement cost, or market rate, or price at a given level of supply or a given level of demand, are all approximations.

<Shrug> You were the one who claimed they were set by demand curves. I was the one pointing out this wasn't the case. I agree what I've put is still too simple, but it's closer to the truth than the comparison you were making.

What anybody actually gets paid is affected by any number of causes too complicated to model mathematically. The point is that prices for labor are no more based on "rightful compensation", as though it were possible for reasonable people to come to an agreement on how much that is, than the respective interest rates upon which the bank's profitability is based are.

Where does the term 'rightful compensation' come from. You've put it in quotes, but I'm not sure anyone has actually used that phrase. I simply pointed out how the two salaries are, in fact, calculated. Neither is set by demand curves, and neither is set by this new concept of 'rightful compensation'.

I'd also point out that the interest rate on which the bank's profitability is based on (half of it, the other half is on markups of sales of financial products), is the product of reasonable people agreeing on what it is. It's the interbank interest rate, and that is substantially how it is set. Hence the LIBOR (London Interbank Rate) scandal late last year, where it turned out the reasonable people were fiddling the rate to make a fast buck.

If that's his moral judgment, then what the hell is the man doing working at a bank?!? He's just indicted the whole economic activity of banking per se as heartless and unrighteous.

That would appear to be a fair assessment of Wells Fargo's business.

Having formerly banked at Wells Fargo, I would not disagree with you on that point; but it's not the issue.

Of course it's the issue. If he's bringing up the conduct of the bank in his email, that suggests he's seeking to change the behaviour of the bank. I don't think that seeking to change the behaviour of the organisation you work for is inherently hypocritical, and the fairly dramatic way in which he chose to do suggests that he's putting his job on the line to effect change.

Certainly there is a contradiction between hiring the best people and paying industry average.

Among the reasons I took my business elsewhere was wretched customer service. The hypothesis that they hire the best people is an extraordinary claim requiring extraordinary evidence.
...
Seriously? You're offering management's empty feel-good "thank you" of the sort pretty much every big company on the planet utters on a regular basis as evidence that Wells Fargo really does have superior employees?!?

No, I'm saying that Well's publically stated position that they hire the best, and their position of paying industry average, represents a contradition on their part, suggesting that they are being disingenuous, if not dishonest. This remains the case whether they are correct that they have good employees or not.

It seems likely that one of the motivations of his email was that he didn't want to work for a bank any more, or at least not a bank run as it currently is. Hence putting his job on the line in an effort to effect change.

No doubt; but the point is, Mr. Oates has spent his working life doing to the customers what he's complaining about Stumpf doing to him. For him to make the appeal on behalf of himself and his fellow perpetrators instead of behalf of the customers is textbook special-pleading.

I'm not convinced. You're assuming that he approves of and intends to continue the present treatment of customers. I've managed to avoid banking with a US bank, largely on the grounds of customer service, so I'm not really in a position to comment on whether their treatment of customers is worse than other banks, or whether such treatment is both obvious and intentional policy. It seems likely that customers would benefit from the changes he is proposing, and I'm struggling to see what place customer service would have in the letter he wrote, and the points he was trying to make.

If he applied his principle consistently his letter would have called on Stumpf to give that $3 billion dollars back to the customers in the form of lower interest rates on their loans, in rightful compensation for the great part the customers play in the success of the company;

That doesn't make sense. The Company openly and publically acknoweldges their belief that their success is down to the superior employees that they have. The customer's performance is not an issue, since there's no evidence that their cutomers are different from those of their competitors. Indeed many of their customers are coming from their competitors.

Seriously? You're offering management's empty feel-good "thank you" of the sort pretty much every big company on the planet utters on a regular basis as evidence that Wells Fargo really does have superior employees?!?

See above. My point is that customers have played no extraordinary role in the company's success, and are aren't central to the point he's making. I can sort of see as an ex-customer, why you might be outraged that a bank employee might write to another bank employees about the treatment of bank employees without mentioning the customers or suggesting that their profit margin be reduced, but I don't share it or agree that it's relevent, nor is it unique to Wells. He also doesn't mention the enviroment, the bank's stance of political issues, or their hiring policies with regards to disadvantaged groups. These are all arguably important points, but I won't condemn him for sticking to his original topic, and I don't agree that it somehow undermines his letter.

 

[Bomb#20]

The point is that prices for labor are no more based on "rightful compensation", as though it were possible for reasonable people to come to an agreement on how much that is, than the respective interest rates upon which the bank's profitability is based are.

Where does the term 'rightful compensation' come from. You've put it in quotes, but I'm not sure anyone has actually used that phrase. I simply pointed out how the two salaries are, in fact, calculated. Neither is set by demand curves, and neither is set by this new concept of 'rightful compensation'.

It comes from the email.

Each and every one of us plays an integral part in the success of this company. It is time that we ask, no, it is time that we demand to be rightfully compensated for the hard work that we accomplish, and for the great part we all have played in the success of this company.

If you skipped over the part of my post where I quoted him on that, this might account for our discussion having apparently spun off into misunderstandings.

You think if the BoD thought they could get a better CEO cheaper they wouldn't do it? Boards fire CEOs all the time.

But not on the grounds that their wages are too high. I'd ask you to find a single example of that for any bank in the Western world.

I haven't ever seen a regular employee fired because his wage was too high. The employer can just cut his pay and he'll quit if he won't put up with it; or, more likely, they never raise his wage in the first place to a level higher than they're okay with.

If nothing else, pay is approved by the Board.

Exactly. You wrote "The CEO gets paid at a rate negotiated by himself and his peers, based on what they feel they deserve. This is several times higher than his replacement cost.", as though CEOs agreed among themselves what to get paid and the BoDs that employ them have no choice. But if a would-be CEO asks for too much the BoD just says no, same as if a would-be engineer asks a hiring manager for too much.

<Shrug> You were the one who claimed they were set by demand curves. I was the one pointing out this wasn't the case. I agree what I've put is still too simple, but it's closer to the truth than the comparison you were making.

<Shrug> I don't see any basis for thinking your approximate model is more accurate than my approximate model, but let's say yours is better. My point remains: the price of labor is set the same way the price of money is set: by what the market will bear, not by any notion of how a factor should be rightfully compensated for the part it plays in somebody's success.

I'd also point out that the interest rate on which the bank's profitability is based on (half of it, the other half is on markups of sales of financial products), is the product of reasonable people agreeing on what it is. It's the interbank interest rate, and that is substantially how it is set. Hence the LIBOR (London Interbank Rate) scandal late last year, where it turned out the reasonable people were fiddling the rate to make a fast buck.

The LIBOR isn't "the" interbank interest rate; it's an average of a lot of different interbank interest rates. The actual rates are based on what those reasonable people are willing to borrow and lend at, i.e., what the market will bear. The scandal was over collusion and over lying about what the rates were.

If that's his moral judgment, then what the hell is the man doing working at a bank?!? He's just indicted the whole economic activity of banking per se as heartless and unrighteous.

That would appear to be a fair assessment of Wells Fargo's business.

Having formerly banked at Wells Fargo, I would not disagree with you on that point; but it's not the issue.

Of course it's the issue. If he's bringing up the conduct of the bank in his email, that suggests he's seeking to change the behaviour of the bank. I don't think that seeking to change the behaviour of the organisation you work for is inherently hypocritical, and the fairly dramatic way in which he chose to do suggests that he's putting his job on the line to effect change.

Of course it's not the issue. He was making an argument that would apply equally to any non-employee-owned bank; I was connecting his argument to a general point about the banking business, not to any specific point about about Wells Fargo; the change he was trying to effect wouldn't have addressed my point; and I was never calling him a hypocrite. I'm calling him a damn fool. He's logically challenged, just like everybody else who finds what passes for economic reasoning among anticapitalists appealing is.

Seriously? You're offering management's empty feel-good "thank you" of the sort pretty much every big company on the planet utters on a regular basis as evidence that Wells Fargo really does have superior employees?!?

No, I'm saying that Well's publically stated position that they hire the best, and their position of paying industry average, represents a contradition on their part, suggesting that they are being disingenuous, if not dishonest. This remains the case whether they are correct that they have good employees or not.

So when a corporation's words and deeds don't match, should it be charged $3 billion for the privilege or else browbeaten into telling its employees they're average? When somebody is showing off pictures of her child and those around you are making the obligatory Oh-how-cute! remarks, I take it you tell her the truth about how cute her kid is?

No doubt; but the point is, Mr. Oates has spent his working life doing to the customers what he's complaining about Stumpf doing to him. For him to make the appeal on behalf of himself and his fellow perpetrators instead of behalf of the customers is textbook special-pleading.

I'm not convinced. You're assuming that he approves of and intends to continue the present treatment of customers. I've managed to avoid banking with a US bank, largely on the grounds of customer service, so I'm not really in a position to comment on whether their treatment of customers is worse than other banks, or whether such treatment is both obvious and intentional policy. It seems likely that customers would benefit from the changes he is proposing, and I'm struggling to see what place customer service would have in the letter he wrote, and the points he was trying to make.

This isn't about customer service. That only came up because for reasons best known to yourself you insisted on taking seriously Wells Fargo's pro-forma claim to have superior employees. (I find customer service at my current US bank just fine, by the way. True, Wells Fargo never sent me an overdraft notice for $3.6 million dollars; but my current bank was ready and willing to have local staff take up their valuable time fixing the bank's error when I pointed it out; not once did a teller point me to the wall phone and tell me to go call customer service.)

No, this is about the primary source of banking income: the difference between the rate banks pay account-holders for deposits and the rate banks charge borrowers in exchange for lending them their account-holders' money. Given that Mr. Oates's goal is a pay raise for himself and his co-workers, I doubt very much his plan is to get the bank to throttle back its income stream.

See above. My point is that customers have played no extraordinary role in the company's success, and are aren't central to the point he's making.

No facts have been introduced into evidence tending to show that the employees have either.

I can sort of see as an ex-customer, why you might be outraged that a bank employee might write to another bank employees about the treatment of bank employees without mentioning the customers or suggesting that their profit margin be reduced, but I don't share it or agree that it's relevent, nor is it unique to Wells. He also doesn't mention the enviroment, the bank's stance of political issues, or their hiring policies with regards to disadvantaged groups. These are all arguably important points, but I won't condemn him for sticking to his original topic, and I don't agree that it somehow undermines his letter.

Oh for the love of god! I'm not outraged that he's not thinking of me or of my pet causes. Why should he be? I wouldn't be thinking of him or his pet causes either if he hadn't made himself famous by being stupid; and I'd have made the same comments about his dumb-ass letter if he worked at a bank I never dealt with. My objection is to the brain-dead economic theory he advanced.

Mr. Stumpf, in effect, makes his millions by being a middleman between the interest paying borrowers on one side and Mr. Oates and his fellow underlings on the other. Mr. Oates, in effect, is complaining that Mr. Stumpf is overpaid and gets undeserved income by sitting between the money source and Mr. Oates. So I'm pointing out that Mr. Oates like all his fellows in the banking business is a middleman too, getting his income by sitting between the depositors and the borrowers. The economic theory that prices should be based not on what the market will bear but on rightfully compensating people cuts both ways.