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Wall Street Bonuses

CEOs and high performing members of the finance industry get huge bonsues linked to performance - is this good for the US?

started by JackCNewell on 12/17/09.

Wall Street Bonuses
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The problem isn’t that Wall Street bankers are given bonuses; hard work and success should be rewarded. The problem is that many financial institutions had poorly crafted performance review and compensation packages. Traders were encouraged to make deals and accept extreme amount of financial risk in order to make a large amount of money in the short term, and to ignore the long term consequences of their new tenuous fiscal positions. Bowing to public outcry, Goldman Sachs Group recently announced that it was changing its bonus structure, and that now firm bonuses will vest over a four year period. Such a scheme should incentivize traders to weight both the short and long term position when they make a deal. Wall Street firms are still being rewarded for hard work and success, but now they are being rewarded for long term successes. That is good for everybody.


by Mr. Huge (56.99) on 12/17/09.

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Performance based pay can increase productivity in mechanical or straight forward tasks...

Performance based pay leads to decreased productivity in tasks requiring simple cognitive reasoning...

So, where do Wall Street and Finance Industry professionals getting huge bonuses fit in? Are they getting paid huge sums to put square blocks into square holes - or are they being paid to try to figure out how to think more abstractly?

There is something foul in the way we reward work.

TED talk in the link about this.


by JackCNewell (51.52) on 12/17/09.

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