Lazard’s $20M Payment to Antonio Weiss to Join Team Obama

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December 4, 2014; CNN

In the nonprofit sector, there is a roiling debate over executive salaries. Just how much money should nonprofits pay their top brass? How high should salaries be to attract “qualified” people from the private sector to take up positions in public charities? How much should nonprofits, taxpayers, and the U.S. government pay to get someone of the qualifications of, say, investment banker Antonio Weiss?

On Wall Street, there is an incentive scheme to make sure its top people get picked for high-level federal regulatory positions so that the Wall Street viewpoint gets heard—as though Wall Street might find itself shut out of access to the governmental inner circles. The latest example is Antonio Weiss, the head of global investment banking for Lazard, the financial services firm, nominated by President Obama to be an undersecretary at the Department of Treasury. His deal with Lazard is that if he gets approved by Congress as Treasury undersecretary, he will get as much as $21 million as a parting gift from his Wall Street employer.

That’s a big-time improvement over the deal that Jack Lew got when he left Citigroup in 2008 for government, finally becoming Treasury Secretary and likely to be Weiss’s boss. Weiss’s deal is five to ten times higher than Lew’s. Why would Lazard do this? Might Lazard and its Wall Street peers be anticipating favorable treatment from federal watchdogs if they hire Wall Streeters like Weiss?

“The question is why would a company give an executive a special financial reward as they’re about to take a government position. Some people say these policies encourage public service, but we worry that they give financial insiders even more sway over the government,” said Michael Smallberg from the Project on Governmental Oversight. “In some ways, these companies are ensuring that they’ll have friends in high places.” CNN reported that Smallberg revealed in a POGO report last year that several corporations give financial incentives to their executives to take governmental jobs—and then return to Wall Street through the revolving door.

Twenty-one million dollars for Weiss to join the Obama administration and do whatever he might do strikes Aaron Ross Sorkin of the New York Times “DealBook” page as sort of okay. “Shouldn’t we be trying to encourage more public service?” asked Sorkin. “And shouldn’t other industries adopt similar pay practices to allow our most talented people from the broadest array of backgrounds to participate in government?”

Is this related to the nonprofit sector? To Sorkin, it clearly is:

“Do we, as a country, want our most highly qualified employees from the private sector to pursue public service?

“The answer, I would imagine, should be yes.

“Wouldn’t it be nice if all private sector businesses offered their employees the opportunity to pursue public service work—or work at a nonprofit or educational institution—without giving up income or other benefits that they may have earned? Of course it would be.”

There is an active debate among critics regarding Weiss’s qualifications for the job (top flight economist Dean Baker from the Center for Economic and Policy Research has written persuasively about Weiss’s thin resume). Senator Elizabeth Warren (D-MA) has become the point person for congressional criticism of the Obama administration’s proclivity to recruit from and become beholden to Wall Street; Tim Geithner and Jack Lew, who followed him as Treasury Secretary, are frequently cited as evidence. But the issue about incentive payments for corporate moguls to take up public service work is really at the heart of the Weiss nomination for the nonprofit sector.

Sheila Bair, the chair of the Federal Deposit Insurance Corporation (FDIC) from 2006 to 2011, penned a devastating critique of the proposed Antonio Weiss payoff in addition to her concerns about his qualifications and his Wall Street pedigree:

“The other troubling aspect of the Weiss nomination is the fact that his firm, Lazard, will pay him some $20 million in stock and deferred compensation once he assumes office. He would not get such a payout if he were to leave for another firm. This is a common Wall Street practice, and the industry defends it by saying it encourages highly talented and experienced financial executives to take government jobs. But such individuals are not joining the government to run the Peace Corps. They are assuming positions where their decisions could have a beneficial impact on their former employers. Only in the Wonderland of Wall Street logic could one argue that this looks like anything other than a bribe. Once upon a time, part of the nobility of joining public service was the willingness to make the financial sacrifice. We want people entering public service because they want to serve the public. Frankly, if they need a $20 million incentive, I’d rather they stay away.”

When government and nonprofits try to attract corporate world denizens to sign up for stints in public service, are they trying to get the perspectives of Lazard, Goldman, or JPMorgan into their offices, as though the power of Wall Street or big business were somehow blocked from influence? Or are they trying to attract people of skill who might refuse public service because of their need for private sector levels of compensation?

We don’t think nonprofit people should be paid poorly, but some of the argument about payment-for-skills (or worse, -for-corporate-experience) seems to omit an essential element long known about the best of nonprofit executives and managers, their passion for nonprofit service and their commitment to nonprofit missions. The nomination of Antonio Weiss for Treasury undersecretary should be a moment not just for an examination of the persistent Wall Street allegiance of the Obama administration, but for a national debate about the importance of public service in government and nonprofit agencies, what kinds of people we might want to attract to civil society, and what kinds of incentives should and should not be offered—or, in the case of Wall Street practices, tolerated.—Rick Cohen