Andrew Cuomo has once again turned the bright glare on Wall Street bonuses, giving everyone a fresh chance to jeer and offer their ideas about how compensation will be reformed.
But the obsession with bonuses is a big distraction whichever side you’re on.
If there’s something to be enraged about, it’s not the bonuses, it’s the profits in the banking sector.
Because shareholders of companies like JPMorgan (JPM) and Goldman Sachs (GS) are perfectly happy fattening up their big earners. To merely say that bonuses should be lower, is to say that profits should be transfered from one class (employees) to another class (shareholders), which is a totally arbitrary thing, and not really legitimate grounds for public policy.
So if you’re going to complain, complain about bank profits/business models. The bonuses are just a symptom.
But nobody will every agree, and bonus season will always be a moan-fest for the rest of us — a chance to be populist. And since all the banks have been bailed out — an original sin for which they’ll be atoning for years and years — bonuses will continue to be viewed with derision.
So here’s how Wall Street is going to deal with the issue. First, they’re going to rename it. Maybe bonuses will be called “commissions” or “risk-weighted commissions” or “production compensation” or something else that’s totally dry. Because really, the word “bonus” is not the proper word, at least not how most people use it. They call bonus what the rest of us call “salary” (almost).
The next thing they’ll do is pay bonuses on a quarterly basis, or maybe every six months. This way nobody can think of it as an end-of-year bonus, like the rest of us (might) get. It’ll look like something else entirely, and it won’t go over so badly with the public or politicians.
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