Published in The Wall Street Journal September 9, 2009 by Ulrike Dauer
Goldman Sachs Inc. Chairman and Chief Executive Lloyd Blankfein said Wednesday that the anger over bank compensation schemes and bonuses was “understandable and appropriate” and that multiyear guaranteed employment contracts “should be banned entirely.
Link to full article.
Published in The Wall Street Journal August 27, 2009 by Lucian Bebchuk
Financial firms seeking to attract and retain talent are reported to be making a substantial use of guaranteed bonuses, and the French Economy Minister recently called for limits on guaranteed bonuses. While many now focus on how using guaranteed bonuses affects the level of pay, it is important to recognize their effect on incentives. Guaranteed bonuses create perverse incentives to take excessive risks, and they consequently could well be worse for incentives than straight salary.
Expert Perspective by Grahall’s OmniMedia Editorial Board
In his New York Times article published on August 10, 2009 “Effort to Rein in Pay on Wall Street Hits New Hurdle” author Eric Dash says: “… on Wall Street, banks have become so eager to lure and keep top deal makers and traders that they are reviving the practice of offering ironclad, multimillion-dollar payouts — guaranteed, no matter how an employee performs.”
Not only will these guaranteed bonuses for the already wealthy Wall Streeters surely irk the public but “… Britain’s banking watchdog, the Financial Services Authority, [warns] that the widespread use of guarantees ‘may be inconsistent with effective risk management’.”
With all the world focused on how compensation can impact the risk dynamic, we thought we would weigh in on the subject of guaranteed bonuses and their apparent risks.
Continue reading “Risky Business” »
Published in The New York Times August 10, 2009 by Eric Dash
A guaranteed bonus might strike many people as a contradiction in terms. But on Wall Street, banks have become so eager to lure and keep top deal makers and traders that they are reviving the practice of offering ironclad, multimillion-dollar payouts — guaranteed, no matter how an employee performs.
Link to full article.