Monday, August 10, 2009

The Guaranteed Bonus, No Matter how An Employee Performs? That’s Not “Free Market,” that’s Corporate Suicide.

We’re only a year into the worst recession since the Great Depression, and already corporate royalty is acting like it never happened. In fact they still believe they deserve all the money, earned or unearned. Can't you just hear them saying, "See ya’ later suckers!"

NY Times: 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.

Obama administration’s pay czar, Kenneth Feinberg, must decide how much overall compensation is too much, even when the pay is tied to performance.

But guaranteed pay poses a particular problem, some compensation experts say, because it is unhinged from financial results.

In Britain, where banks have begun to make similar guarantees, regulators have said they are concerned that the practice could lead to poor accountability. Last month, Britain’s banking watchdog, the Financial Services Authority, sent bankchiefs a letter warning that the widespread use of guarantees “may be inconsistent with effective risk management.”

Now that’s oversight with teeth.

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