HeartThais Posted March 20, 2009 Report Share Posted March 20, 2009 I bet it is true where you work. Show me the bonus formula for the risk management guys at your place of employment. I am sure it includes the revenue booked by the dept the risk guys are overseeing. They don't publish the bonus formula where I work. But how are you so sure? They publish the bonus formula where you work? You are a high-level finance exec with access? I am not. I draw my conclusions by the daily arguments I see between the traders and the risk guys. Risk doesn't report to trading where I work but I know that in some places it does. Btw, in case anyone is interested, here are the payouts in a *single quarter* by US taxpayers to compensate foreign counterparties in full. Soc-Gen: 6.9B, Deustche Bank: 2.8B, UBS: 2.5B. Link to comment Share on other sites More sharing options...
unit731 Posted March 20, 2009 Report Share Posted March 20, 2009 unit, I really don't think the wall-street bonus system is the result of fat cats scratching each other's backs. My impression is that the bottom-line matters much more in finance than any industry I've ever seen and I've seen a lot. You can have 10 successful years but 1 blow-up and you'll be sent packing without a tear. The bonus system is designed to get an entire work force to give up their lives for the cheapest cost to the firm. If you look at the distribution of bonuses, only a very small percent make the big bonuses. The rest are aspirants and most will give up their lives, not to mention the countless hours they spend off the job to compete. It is a huge carrot and most will never reach it. The bonus system not only draws the best and brightest but ensures their voluntary indenture to the firm. It also creates a moral hazard as shygye pointed out. I think the vast majority think that a 'bonus' is something the 'boss' gives a good employee for doing a good job. I don't think most see that this is a contract - part of the employees pay package - not an arbitrary Christmas 'gift' at end of year. I'm against the fat bastards that screwed up the world economy - just as much as the next guy. But if this bonus is contract and part of a total pay package - then the rules of law should be followed. We are not a civilized society without rules. The US Congress to jump in and propose legislation to tax the 'bonus' at 90% is just a rain dance in the desert - a mockery of the civilized rule of law. Link to comment Share on other sites More sharing options...
cavanami Posted March 20, 2009 Report Share Posted March 20, 2009 I'm broke and my buddy sends me $1000 USD but says it is not to be used for drinking and whoring...I go off and drink and do some whoring... Is my buddy wrong to complain and demand the rest of his money back? No, the money had limitations applied to is, just as the bailout should have! The bailout $$$ *** should *** have limits and monitoring. Sorry, but if the bailouts exclude a bonus, then AIG just doesn't have $$$ to give a bonus. Contract or no contract, you can get blood out of a rock! Get the company profitable and then look at paying a bonus, just don't give the bonus using my dollar! Link to comment Share on other sites More sharing options...
drogon Posted March 20, 2009 Report Share Posted March 20, 2009 No matter what the contracts and/or bailout agreements said. This looks quite "simple" to me. AIG has no money -> the government (citizens tax money) is used to help the company -> hence the money given as "bonus" is money the company doesn't have.... Another parallel (smaller scale in my case): By contract I have the right to get a bonus during summer (gross) which equals 15% of my (gross) anual income. The bonus is "company performance based" -> hence if the company goes bust...I am still entitled to get my bonus -> and even if the US government comes to rescue the company (which wouldn't suprise me as with the current US government telecom projects they can't afford to have this company "die") -> I would not accept the bonus as this wouldn't come from the company's profits but from other people's pockets (and foreign pockets in this case).... And I really want this bonus but I couldn't accept it in such a scenario. Link to comment Share on other sites More sharing options...
shygye Posted March 20, 2009 Report Share Posted March 20, 2009 I bet it is true where you work. Show me the bonus formula for the risk management guys at your place of employment. I am sure it includes the revenue booked by the dept the risk guys are overseeing. They don't publish the bonus formula where I work. But how are you so sure? They publish the bonus formula where you work? You are a high-level finance exec with access? I am not. I draw my conclusions by the daily arguments I see between the traders and the risk guys. Risk doesn't report to trading where I work but I know that in some places it does. Btw' date=' in case anyone is interested, here are the payouts in a *single quarter* by US taxpayers to compensate foreign counterparties in full. Soc-Gen: 6.9B, Deustche Bank: 2.8B, UBS: 2.5B.[/quote'] Jack Welch mentioned how the bonuses for risk management employees worked in an interview with Charlie Rose. Also there is this Link Many corporations may have gotten into trouble not just because they didnâ??t listen to warnings from the their chief risk officer (CRO), but also because they were compensating the risk manager in the wrong way. So says Max Rudolph, an actuary with the Society of Actuaries (SOA) and principal in Rudolph Financial Consultancy. Corporate compensation has become problematic because it is one-sidedâ??managers get bonuses when a company does well as a result of bets they take, but if things later go south because of that same bet, there is no penalty. When it comes to risk officers, the problem is compounded. â??There is a question as to whether risk officers should even receive bonuses at all,â? says Rudolph. â??If the risk manager has a bonus tied to the current year income, it aligns his motivation with the rest of management. Even if you were to give the bonus based on three-year or five-year performance, there could still be a problem. It is better for this position to be a straight salary, but better paid than it generally is at present.â? Link to comment Share on other sites More sharing options...
Bangkoktraveler Posted March 21, 2009 Report Share Posted March 21, 2009 When it is a guaranteed minimum bonus to keep you from leaving for a competitor. Thanks. I guess I'm kinda mixed on this. If ones employment - one aspect is a contract that provides money for one to stay - then why not take the money? I surmise that this is kind of murky waters. I think if they had used another word there might not be this 'outrage' out there. If these are the same guys and gals who screwed up the company - opinions differ about the word 'bonus' and the taking of such by the employees. A promise is a promise. Should the management 'recind' this aspect of the employment contract? Should these employees give back the 'bonus'? AIG is in pseudo bankruptcy. If the company was in bankruptcy, the Trustee would take the money back in a heart beat. This i why I think the politicians are making the rich, richer and the poor, poorer. I see no justice. Link to comment Share on other sites More sharing options...
Steve Posted March 22, 2009 Report Share Posted March 22, 2009 I'm a capitalist. I love the free market (within reason). I actually worked at a financial services company that got bought out by AIG back in '99. The one thing this whole mess tells me though is that the wall street bankers and others are not contrite. They see this as a get out of jail card. They have always been an arrogant bunch. Its how wall street and big corporations are. No crime in that. In fact, my first job out of college was as a clerk at a OTC trading desk and the bosses looked for a certain level of arrogance. You can't be weak hearted in that sort of business. I may be seeing it wrong and perhaps its not like this but the feeling I get is that these guys (I'm including banks, auto company, execs, all the big money guys and underlings) have a mentality that they are the best and the brightest, sh*t happens and sh*t happened. I feel that there is no change in mentality and they given the chance they will repeat it again. My first boss at that trading desk thinks that the reason why there are always a boon and optimism after any big crisis ('30s depression and WW2 to the 'fabulous '50s, '70s stagflation to '80s boon) is that the general market are short term thinking folks. There are always a lot of new blood coming in who were not around for the bad years. I think that the industry generally hires those who are smart and/or knows they are smarter than most and with that a certain arrogance. Remember a lot of them went to the top business schools, have MBAs, etc. The politicians are no better to some extent. The power and prestige of being a senator or a member of Congress sometimes elicits a similar mentality. Its also a cultural thing in the U.S. We are not conservative financially as a rule. We aren't german or swiss bankers who have a reputation for conservatism to some extent. The UK is somewhere in the middle as well and I think a bit closer to us than their european cousins. I just get the feeling they are looking for the best angle in all this. Billions of 'free' government money. Why not make a little for yourself? Link to comment Share on other sites More sharing options...
Bangkoktraveler Posted March 22, 2009 Report Share Posted March 22, 2009 I'm a capitalist. I love the free market (within reason). I actually worked at a financial services company that got bought out by AIG back in '99. The one thing this whole mess tells me though is that the wall street bankers and others are not contrite. They see this as a get out of jail card. They have always been an arrogant bunch. Its how wall street and big corporations are. No crime in that. In fact, my first job out of college was as a clerk at a OTC trading desk and the bosses looked for a certain level of arrogance. You can't be weak hearted in that sort of business. I may be seeing it wrong and perhaps its not like this but the feeling I get is that these guys (I'm including banks, auto company, execs, all the big money guys and underlings) have a mentality that they are the best and the brightest, sh*t happens and sh*t happened. I feel that there is no change in mentality and they given the chance they will repeat it again. My first boss at that trading desk thinks that the reason why there are always a boon and optimism after any big crisis ('30s depression and WW2 to the 'fabulous '50s, '70s stagflation to '80s boon) is that the general market are short term thinking folks. There are always a lot of new blood coming in who were not around for the bad years. I think that the industry generally hires those who are smart and/or knows they are smarter than most and with that a certain arrogance. Remember a lot of them went to the top business schools, have MBAs, etc. The politicians are no better to some extent. The power and prestige of being a senator or a member of Congress sometimes elicits a similar mentality. Its also a cultural thing in the U.S. We are not conservative financially as a rule. We aren't german or swiss bankers who have a reputation for conservatism to some extent. The UK is somewhere in the middle as well and I think a bit closer to us than their european cousins. I just get the feeling they are looking for the best angle in all this. Billions of 'free' government money. Why not make a little for yourself? The number one country that is deep in the black in regards to their finacial responsibility (National debt) is China. The number one country that is the deepest in the red is the USA. Link to comment Share on other sites More sharing options...
Al Posted March 22, 2009 Report Share Posted March 22, 2009 The number one country that is deep in the black in regards to their finacial responsibility (National debt) is China. The number one country that is the deepest in the red is the USA. Hmmm, and we used to call them Red China. Link to comment Share on other sites More sharing options...
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