Time To Rethink Wall Street’s Bonuses?

If an employee brings in revenue or cost savings for their company, is it unreasonable for that person to receive a bonus equivalent to one percent of the value they brought to the firm?

Should the one percent change if the value brought to the firm is $10,000 as opposed to $10 million? Does it matter if the person is a Wall Street banker?

Photo by jbonnain, courtesy of flickr

In my March issue of Forbes Magazine, I read an anonymous submission entitled, “An anonymous trader defends his pay.”

Here is the text:

In 2008, during the darkest hours of the global financial crisis, true heroes emerged on Wall Street. Skilled professionals were sent in to clean up the mess, and some reduced losses by hundreds of millions, even billions, of dollars. Financing desks kept firms alive every single day. Certain traders navigated safely through neck-snapping volatility, generating real revenue while reducing risk. Without them losses would have been many billions worse, and the list of financial institutions signing up for bailouts would be much, much longer.

These heroes–and I include myself among them–deserve to be rewarded. I believe my bonus last year was too low given what I accomplished. Yes, it’s hard to feel sorry for someone who makes more than $400,000 a year. But is it crazy to suggest that if I had a true, positive economic effect on my firm of $100 million, I should receive 1% of that number as compensation?

Sure, one percent doesn’t seem like much, but when the amount of money at stake is so large it seems excessive. And if the company has been taken over by the government, it just seems wrong.

It would be nice if everyone who added a “true, positive economic effect” to their firm were rewarded. But for most people, this is not reality.

I have never worked as a trader, so without full knowledge of the territory I don’t feel schooled enough to give a wholehearted yea or nay. However, I have worked in other positions with people who (in addition to myself) added value to their firms without bonuses or recognition.

I guess my issue is that until the value employees create is enough to return the company to a self-sufficient state, then no one should expect to receive their usual bonus, or quite arguably, any bonus. Perhaps, this is about the expectations more so than the money.

If you share in the wealth during good times, then why should you expect not to share in the losses during bad times?