Marc Hodak

  • Bonuses: Economic logic leads to a "paradox"

    waterfall-detail Bonuses: Economic logic leads to a "paradox"

    Paradox: a statement that is seemingly contradictory or opposed to common sense and yet is perhaps true.

    The media in Europe are starting to call skyrocketing banker salaries across Europe the "bonus paradox."

    The EU limit on bonuses to 100 percent of salary (or 200% with shareholder approval) is ushering a paradoxical parade of unintended consequences. But just because consequences are unintended doesn't mean they are unpredictable.

    The economic ignoranti fully expected overall banker pay to be clipped by the EU measure. José Manuel Barroso, president of the European Commission said,Bonus “This is a question of fairness." So, there it is." read more


  • The hidden risk of "at-risk" pay

    May 30th blogThe hidden risk of "at-risk" pay

    On Monday, Staples, Inc will try to win its "Say-on-Pay" vote with ISS recommending against approval the executive compensation plan. ISS made its recommendation based on its usual arbitrary, micro-managing concerns which are not the subject of this post. Here, I want to highlight the problem Staples created for itself, without anyone's help, and unintentionally revealed in this pair of sentences:

    The [Compensation] Committee... recognized the need to address retention of key talent and to continue to motivate associates in light of the fact that we did not pay any bonus under the Executive Officer Incentive Plan or Key Management Bonus Plan in 2013 and 2012...Read more


  • The Last Refuge of Scoundrels

    0The Last Refuge of Scoundrels

    It used to be said that patriotism was the last refuge of scoundrels. Now that patriotism is being viewed with more irony than honor among a certain portion of Americans, I think the "last refuge" has become the bashing of "fat cats." My evidence is a recent spate of articles on how President Obama, who is polling rather poorly these days, is once again going after Wall Street bonuses. There is no surer way to get heads nodding again when you speak.

    I nod, too, but for a different reason. I continue to be astounded by the idea that banks had been managing the well-understood "trader's option" problem for decades, then suddenly lost the ability to do so in the mid-2000s, and crash goes the financial system. This explanation simply doesn't hold water. Neither does the idea that bankers suddenly became "greedy" in the mid-2000s, and crash went the financial system. No. If one wishes to develop a cogent theory about "what went wrong," one must identify distinguishing characteristics, not common, long-imbedded ones.... Read more