Wednesday, August 12, 2009

Executive Pay

I hate to say I told you so, but I told you so. What have investment banks learned from the populist attempt to limit pay - exactly what I said they would - they would either:

A. Not call it a bonus anymore
B. Contractually guarantee the bonus (Aka - same as salary)

All of the bankers who are unemployeed have learned that the money was not free, and that in the future they should save because that is what they are getting paid for, the riskiness of the job and the potential of being laid off.

I am not saying the system is perfect, but putting limits on performance is a bad idea. Instead, the money should be tied to longer term incentives and not paid out all at once. That is what we want anyhow, which is more "investment" in longer term success of the financial system.

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