Inconvenient Truth About Bonuses

To paraphrase Marilyn Monroe, you don’t pick a job for the money, but it sure helps. No doubt many investment bankers, traders and asset managers chose their careers for the intellectual stimulation, their love of economic theory, and the punishing hours. But the bonuses sure help – particularly when you become accustomed to them and they show such little correlation to performance.

Bonuses have long been the lightning rod for the social and political outrage over the excesses of the securities industry before, during and after the financial crisis. As such, they have become something of a regulatory obsession, culminating last week in the publication of new European-wide rules that will impose strict conditions on how bonuses should be paid.

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