Put Wall Street Bonuses to Social Good

Bomb in Wall Street, 1920

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There have been many stories over the last couple weeks about Wall Street Bonuses. The bonuses are given after many of these institutions recovered huge profits in 2009. However, the source of the investments that led to the profit comes from us, the taxpayers, in the form of the Troubled Asset Relief Program (TARP.) Reports suggest that the largest firms receiving these funds are giving out over $90 million in bonuses. The outrage comes, logically, as it seems that the money that the government invested was meant to jump start the economy and get the same banks making loans. Instead of making loans, however, many many millions have gone directly to bank execs and investors, the very people blamed for the economic crisis. As a result lawmakers are looking at ways to regulate or even tax these bonuses. The UK has already instituted large taxes on bonuses. Our own congress is debating 50% taxes on bonuses over $50k and using the tax to help small and midsized businesses. Instead of adding more bureaucracy to these funds, the government should consider encouraging a ‘good returns,’ or social venture model.

I propose giving tax cuts to people receiving these bonuses if they invest 100% for a year or more in social ventures. Many organizations have begun giving microloans to the nation’s and world’s poorest people, helping spur entrepreneurship among the most poverty stricken people, as we heard at our second Spark Club meeting from Salah at Soap Hope. His organization withholds a year of profit to grant microloans to women in poverty in the DFW area. These loans are repaid and there is only a 2% default rate. However, the businesses and entrepreneurship spurred by these loans create further wealth in the community, potentially making more customers for Soap Hope and the businesses they have inspired.

I am all for spreading the wealth, however the Robin Hood methods of government agencies moving wealth from one place to another has proved inefficient and unsustainable. Social Ventures and microfinance however are offering very interesting models that are creating social change that is sustainable. If the government wants to do something about these greedy bastards and their fat cat bonuses, stop looking at old tax and regulation policies and start looking at ways to inspire social good.

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5 thoughts on “Put Wall Street Bonuses to Social Good

  1. Bernie says:

    I thought that Spark Club was apolitical. Can we leave the conservative talking points for political blogs?

    • Christian Caldwell says:

      Thanks for the comment Bernie. Social Innovation by its nature will dip into political issues. I don’t subscribe to conservative talking points, so any resemblance there is purely coincidental. To spur social innovation many options should be on the table. I’d love to hear what you think of these points and whether or not they could help.

      • steevithak says:

        Wow, microfinance, social investing, spreading the wealth, and doing something about “greedy bastards” are now conservative talking points? Who knew! πŸ™‚

        I think it’s a good idea, though you may be underestimating the amount of effort many corporations will put into avoiding doing good. They’ll probably set up phony social ventures that benefit their own bottom line in some way. If you could come up with enough safeguards to assure the money really got used for something beneficial, you might be on to something.

  2. soaphope says:

    One thing I like about Good Returns is that it provides financial leverage for social good, as opposed to financial leverage for personal gain. All that is required is for an investor to have the discipline to wait for one extra year to receive their dividend. It also requires nonprofits to think about their mission in a new way: it has to be sustainable.

    I love the idea of a tax break for people who invest their dollars this way. It’s not a donation, so it’s not tax deductible today. Perhaps dividends that have spent a year invested in a qualified nonprofit could be taxed at capital gains rates rather than at ordinary income rates. That alone would encourage many businesses to implement Good Returns.

  3. Mark Lewis says:

    Social entrepreneurship is a powerful emerging force in this economy that is rapidly moving into mainstream business thinking through its contextual association with related trends such as CSR, sustainability, ethical corporate governance and especially the SRI and impact investment markets. I think it’s a mistake to try to force SROI down the throats of the corporate financial industry through political gimmicks for at least three reasons.

    First, a maturing SROI market is already gaining credibility traction with potential investors and stakeholders inside mainstream financial markets largely on the strength of its perceived reliance on competitive market principles rather than a traditional NPO style of reliance on philanthropic assistance. Financial sustainability is paramount in the eyes of the corporate world if SE is to continue to make inroads as a legitimate business model in the minds of corporate decision makers. An attempt to use political pressure to redistribute wealth, whether it’s seen as “tax” money or not, would likely severely damage SE’s image as a sustainable business model.

    Second, we’re not going to solve global problems by continuing to rely on government or corporate handouts or assistance that even has the appearance of an old style business model suitable to 20th century social change initiatives. A strong entrepreneurial model for social change should avoid the perils of control that inevitably come with government assistance. The last thing social innovation and entrepreneurial initiative from bottom-up change agents needs at this juncture is the perception that they’re dependent on top-down solutions to survive. Tapping into some kind of government mandated fund that’s pregnant with politically controversial issues related to wealth redistribution and class partisanship can only confuse people more than ever on what constitutes social entrepreneurship.

    Finally, the solution to corruption and bad corporate policy is more likely to result from companies paying a price for their lack of transparency and breech of the public trust in the internet culture than it is from enacting Robin Hood style legislative actions. Corporations always find legal loopholes to avoid distasteful practices and I doubt this would prove to be an exception. Even if this could be successfully done, do we really want to build a business model on the strength of an idea that suggests we need a forced handout from big business? I think it far wiser to protect the integrity of the model by keeping it free of both government entanglements as well as the court of political opinion and class warfare.

    We have a chance to fundamentally change the way business is done for generations. Let’s not blow it with attempts at short term solutions that merely muddy the waters by forgetting why we’re considered entrepreneurs in the first place, because we know how to solve problems with original thinking and the ability to leverage resources not already at our disposal. Grabbing public money through what might seem to many people as just another perk to the non-profit sector is not the way to go.

    Mark Lewis
    Strategic Business Intelligence Group

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