Comments on: What’s your bonus really worth? http://blogs.reuters.com/breakingviews/2010/07/01/whats-your-bonus-really-worth/ Mon, 26 Sep 2016 03:26:00 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Bob9999 http://blogs.reuters.com/breakingviews/2010/07/01/whats-your-bonus-really-worth/comment-page-1/#comment-3000 Fri, 02 Jul 2010 13:49:42 +0000 http://blogs.reuters.com/columns/?p=3444#comment-3000 Bonuses are at the heart of the problem of over-risky investing on both sides of the Atlantic. The starting point is that the people making the investment decisions are using other people’s money. If they were trading for their own personal accounts, they would be internalizing all of the risks and their incentive to take either too much or too little risk would be minimized. They are not trading for their own personal accounts, however, and that means that the downside consequences are externalized. In other words, they do not suffer all of the consequences personally if they make bad investment decisions. With bonuses, however, the upside consequences are internalized, and quite probably magnified. In other words, they benefit if they make good investment decisions, and they probably benefit more than would have been the case if they were trading for their own account. This means that the current system of compensating investment decision-makers encourages risk-taking by rewarding the decision-makers for gains from risk while insulating the decision-makers from the consequences of losses from risk. Ideally, one solution would be to have a system where investment decision-makers are required to put up a bond from which trading losses may be subtracted, while at the same time positive compensation would be 100% in the form of bonus. The terms of the arrangement could be set to simulate, as nearly as possible, what the situation would be in investment decision-makers were trading solely for their own accounts.

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By: edbel http://blogs.reuters.com/breakingviews/2010/07/01/whats-your-bonus-really-worth/comment-page-1/#comment-2998 Fri, 02 Jul 2010 08:07:33 +0000 http://blogs.reuters.com/columns/?p=3444#comment-2998 Sounds good to me

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By: murfster http://blogs.reuters.com/breakingviews/2010/07/01/whats-your-bonus-really-worth/comment-page-1/#comment-2997 Fri, 02 Jul 2010 07:37:35 +0000 http://blogs.reuters.com/columns/?p=3444#comment-2997 HAH!

Austerity for bankers!

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By: civictyper http://blogs.reuters.com/breakingviews/2010/07/01/whats-your-bonus-really-worth/comment-page-1/#comment-2996 Fri, 02 Jul 2010 07:14:24 +0000 http://blogs.reuters.com/columns/?p=3444#comment-2996 Bankers will merely up the base salaries… Restrictions on bonuses won’t stop them and I believe that we are all making a big mistake here. Sure they need to be controlled but forcing cuts in their pay will merely decrease the quality and motivation of their work and in turn, the rest of the economy.

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By: ckumzubair http://blogs.reuters.com/breakingviews/2010/07/01/whats-your-bonus-really-worth/comment-page-1/#comment-2995 Fri, 02 Jul 2010 06:34:22 +0000 http://blogs.reuters.com/columns/?p=3444#comment-2995 wow…its really needed in real life.

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By: doctorjay317 http://blogs.reuters.com/breakingviews/2010/07/01/whats-your-bonus-really-worth/comment-page-1/#comment-2994 Fri, 02 Jul 2010 03:58:46 +0000 http://blogs.reuters.com/columns/?p=3444#comment-2994 “The present value of a $1 million bonus could be cut to less than $800,000, according to Reuters Breakingviews calculations.”

Oh poor soul. My heart bleeds for you.

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