Richard Parsons’s Portfolio

According to Bloomberg, Richard Parsons – the chair of Citigroup (NYSE:C) since February – now owns stock in the company worth, at yesterday’s close, about $350,000 (96,298 shares at $3.69).  For such a well-established and highly remunerated corporate executive, we can reasonably refer to such an amount as “chump change.”  In May, Forbes estimated Mr. Parsons’ net worth as a little under $100m.

I have no particular complaint about Mr. Parsons; he is an experienced banker, with the very best political connections.  But I would point out that while Wall Street likes to talk big about people having “skin in the game,” when it comes to putting their personal net worth on the line, many finance executives prefer a different kind of arrangement.  Specifically, they are attracted to compensation structures in which they have a lot of upside but very little downside.

If you had such a deal, how would this affect your relative interest in risk-taking and careful supervision of subordinates?

David Brooks famously argued, a few months ago, that the problem with our banking system circa 2008 was not anything about incentives and political power, but rather stupidity.  Probably he was right that this mattered in some degree for the housing bubble.

But what should we think about an industry that is carefully and deliberately constructing the exact same arrangements again?  Won’t this lead us inexorably towards a Truly Great Bubble?  Stupidity involving smart people in well-heeled organizations must surely be about incentives for those at the top.

Just because these arrangements involve and are being implemented by a member of President Obama’s Transition Economic Advisory Board, does that make them OK – or even remotely sensible?

And where exactly do you see the impact of the adminstration’s vaunted regulatory reforms for the financial sector here?

If your response is “well, that’s the system and there’s nothing you can do about,” you have a point.  But if that’s your response and you work in the White House, we all have a very big problem.

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About Simon Johnson 101 Articles

Simon Johnson is the Ronald A. Kurtz (1954) Professor of Entrepreneurship at MIT's Sloan School of Management. He is also a senior fellow at the Peterson Institute for International Economics in Washington, D.C., a co-founder of, a widely cited website on the global economy, and is a member of the Congressional Budget Office's Panel of Economic Advisers.

Mr. Johnson appears regularly on NPR's Planet Money podcast in the Economist House Calls feature, is a weekly contributor to's Economix, and has a video blog feature on The New Republic's website. He is co-director of the NBER project on Africa and President of the Association for Comparative Economic Studies (term of office 2008-2009).

From March 2007 through the end of August 2008, Professor Johnson was the International Monetary Fund's Economic Counsellor (chief economist) and Director of its Research Department. At the IMF, Professor Johnson led the global economic outlook team, helped formulate innovative responses to worldwide financial turmoil, and was among the earliest to propose new forms of engagement for sovereign wealth funds. He was also the first IMF chief economist to have a blog.

His PhD is in economics from MIT, while his MA is from the University of Manchester and his BA is from the University of Oxford.

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