http://www.alexhopmann.com/2009/03/19/prioritizing-our-outrage-aig-and-jon-stewart/ Modern Art makes me want to rock out Sat, 11 Feb 2012 05:02:57 +0000 http://wordpress.org/?v=2.7 hourly 1 http://www.alexhopmann.com/2009/03/19/prioritizing-our-outrage-aig-and-jon-stewart/comment-page-1/#comment-101638 Alex Sat, 21 Mar 2009 17:44:34 +0000 http://www.alexhopmann.com/?p=493#comment-101638 I agree that the bonus thing is a normal part of the financial industry compensation system. What isn't clear here are- 1) Are normal bonuses like this guaranteed? Because even though its thought of as part of your core compensation, my assumption was that it is normally done so in a way with lots of discretion of management to adjust them to reflect performance. 2) What was the timing of these specific contracts? If these contracts were done as things were starting to look bad and the likelihood of government help was becoming clear, as a way to lock in payments to insiders even in the event of failure or near-failure, that becomes what the NY AG has called "fraudulent conveyance". In other words, its illegal for management to sign a contract with themselves transferring themselves money when the overall institution is effectively insolvent. 3) What is the industry going to do to fix the compensation system? This is a much broader question and I'll probably leave it for its own blog post, but until the industry fixes both employee compensation and client fee structures to focus on long term performance over massive payout for short term non-sustainable gains, we are going to continue to see disasters. I agree that the bonus thing is a normal part of the financial industry compensation system. What isn’t clear here are-
1) Are normal bonuses like this guaranteed? Because even though its thought of as part of your core compensation, my assumption was that it is normally done so in a way with lots of discretion of management to adjust them to reflect performance.
2) What was the timing of these specific contracts? If these contracts were done as things were starting to look bad and the likelihood of government help was becoming clear, as a way to lock in payments to insiders even in the event of failure or near-failure, that becomes what the NY AG has called “fraudulent conveyance”. In other words, its illegal for management to sign a contract with themselves transferring themselves money when the overall institution is effectively insolvent.
3) What is the industry going to do to fix the compensation system? This is a much broader question and I’ll probably leave it for its own blog post, but until the industry fixes both employee compensation and client fee structures to focus on long term performance over massive payout for short term non-sustainable gains, we are going to continue to see disasters.

]]> http://www.alexhopmann.com/2009/03/19/prioritizing-our-outrage-aig-and-jon-stewart/comment-page-1/#comment-101327 Nick Fri, 20 Mar 2009 18:36:46 +0000 http://www.alexhopmann.com/?p=493#comment-101327 Alex it's not about one-time contracts and short-term windfall payments. Like it or not these "bonuses" are not really bonuses in the way that non-Wall St thinks of them. They're made explicitly clear that they are part of our overall comp - in fact more than 50-90% of total comp for most of us. We're told to blur the two numbers (salary and bonus) when thinking about our comp. Not saying these guys did a great job but to take back what was promised to them when they signed up seems kind of crappy. Fire them if you want but a deal's a deal. - your bro Alex it’s not about one-time contracts and short-term windfall payments. Like it or not these “bonuses” are not really bonuses in the way that non-Wall St thinks of them. They’re made explicitly clear that they are part of our overall comp - in fact more than 50-90% of total comp for most of us. We’re told to blur the two numbers (salary and bonus) when thinking about our comp. Not saying these guys did a great job but to take back what was promised to them when they signed up seems kind of crappy. Fire them if you want but a deal’s a deal.
- your bro

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