The Return of Stock-Based Compensation on Wall Street

Everything old is new again, as Yves

Smith points out with respect to UBS’s bonuses. Apparently

the poor Swiss bankers won’t get cash this year: everything above a measly $750,000

is going to be paid in stock. Is this kind of tight-fistedness going to backfire?

Not if Goldman Sachs is any indication. Back when it was still a partnership,

Smith says, "the line at Goldman was the partners lived poor and died rich."

Indeed, I can see other banks looking jealously at UBS and trying their hardest

to follow suit. It makes very little sense for compensation to be structured

so that you earn loads of money in 2006 for piling on too much risk, and then

get fired in 2007 when those bets go bad. (It makes even less sense if you’re

then compensated

in 2007 all over again for your 2006 "performance".) Much better

that you should earn relatively little in 2006, but get lots of equity in the

firm which pays off in spades if your earnings turn out to be non-fictional.

This entry was posted in pay. Bookmark the permalink.