BIO
MOST SHARED
- LinkedIn Outperforms on Earnings, Revenue
- How to Date a Wall Street Man
- Activision Beats on Earnings, Raises Dividend
- Zynga and Hasbro Announce Toy-Making Partnership
- Steelers' Antonio Brown Spends Super Bowl Week with Twitter Fan Turned BFF
- Commodities Tomorrow: Geopolitical Risk Continues
- Nuance Doesn’t Live Up to Hype
- Commentary: USPS Stuck in the Past
- Warren Buffett: Stocks Will Outperform Gold and Bonds .. and They're Safer 'By Far'
- Don’t Use ECB as Last Resort: Economist
- UPDATE: Massive Trend Just Getting Underway in Financial Services: Finerman
- Terranova: Beware Nuance Play On Apple Spike
- Mortgage Settlement Could Buoy BofA Most: Traders
- LinkedIn Earnings Bode Well for Hiring and Social Media
- The Euro Still Has Room to Rise: Strategist
- Victor Cruz ‘Understands’ Gisele's Super Bowl Frustrations
- Mark Mahaney Talks Akamai, Groupon, Yahoo ...
- Unusual Volume: Taleo Jumps After Oracle's $1.9 Billion Offer
- Warren Buffett: Stocks Will Outperform Gold and Bonds .. and They're Safer 'By Far'
- iPad 3, iTV and iPhone 5 Should Drive Apple to $665: Money Pros
RSS FEED
Text Size 
Dear Mr. President, A Bonus Isn't A Bonus
 |
iStockphoto |
The fury over the fact that Wall Street paid out $18.4 billion in bonuses in 2008, the "sixth largest" amount in history, is about words and nothing else.
This isn't a compensation issue, it's a diction issue.
Outside of lower Manhattan, a "bonus" is a special, one-off reward for performance above and beyond what's expected of an employee. And if investment bankers had gotten $18.4 billion worth of bonuses in that traditional sense of the word, then of course it would be truly outrageous.
But on Wall Street, and at many law firms as well, a bonus is simply part, often the greater part, of your regular compensation. It may vary from year to year, but when you take one of these jobs, the understanding is that you'll be paid a base-salary and once a year you'll also get a "bonus."
The bonus varies in size from year to year, but it's not actually a "bonus" in the way most people think of the word. It's an expected part of your salary, delivered in a lump- sum near Christmastime. Historically, for many people on Wall Street, the base salary is much less than they could be earning elsewhere, but because they know they're getting a sizable "bonus," it makes sense for them to stay at their jobs.
So a bonus isn't a bonus.
But since the vast majority of people don't know that, the public gets angry. And when the public gets angry, Democratic politicians who probably know better have to demagogue the issue. That's how you get the President saying, "there will be a time for profits and bonuses. Now is not that time."
I don't think this is class-warfare, although I wouldn't mind some of that, it's a simple misunderstanding. Obama wouldn't say, "now is not the time for paychecks." But that's essentially what a bonus is on Wall Street, just an expected part of your compensation. This is not crooked, greedy CEOs lining their wallets, although I won't deny that plenty of that happens.
The screwed up thing is that it's clear Obama wants to help these bankers, or at least keep their companies alive. But, as I see it, they're making it as hard on him as they possibly can from a PR standpoint, which is all that matters in politics.
We can't create a "bad bank" to relieve troubled financial institutions of their depressed assets if they're paying out $18.4 billion in "bonuses." It just looks terrible. So here's my advice to Wall Street: help us help you.
Stop paying bonuses.
Call them something else.
Think of something boring like "annual performance-adjusted block compensation."
I know "bonus" sounds sexy, but that's precisely what's wrong with the term.
A little verbal magic and this whole problem goes away.
Questions? Comments? Send them to
- Many have called to abolish the Federal Reserve. But what would happen if it was dissolved for good?
- Entrepreneurs have increasingly been buying back their companies over the last three years.
- Where are the best city locations for singles to take the online dating plunge?
- A Steelers fan spent a week with wide receiver Antonio Brown- and it was all due to tweeting.
- Here’s a look at the woman behind the newest collectible toy that kids love.
- Grab a brew—or not—and click ahead to experience the world’s most highly rated beers.
Data is a real-time snapshot *Data is delayed at least 15 minutes
