May 19, 2011
As an American seriously affected by the economic collapse of 2008 (I am one of the long-term unemployed), I don’t want it to happen again. As a former Compensation Consultant with a major oil company, I have some ideas about reforming Wall Street compensation practices.
It is clearly evident from the numerous books and articles I've read that Wall Street greed and outrageous pay practices were a major cause of the collapse. One way to change the incentives so they don’t collapse our economy again would be to delay the bonuses for at least three years. That way, we’ll know if the loans they made in year one remain good. In the bad days of yore, bankers paid themselves on the volume of loans (mortgages) they generated, not on their quality.
Regarding stock options, they should instead use performance shares, which are long-term proposition that are tied to performance against peers, although with all the consolidation, that will be more challenging.
This ensures business decisions are good for the long-term vision of the company and the economy as a whole.
The entire short-term thinking and compensation philosophy on Wall Street needs to change now! It's not good for our country, and it fuels excessive risk-taking, greed and hubris. One giant economic collapse is enough for a lifetime. Let's ensure it does not happen again - EVER!
Thank you for considering my comment,
Alexander Clayton