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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John McCarthy who wrote (93542)	1/30/2009 2:56:19 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

It does not appear the WSJ went with all the data it had. At least I am told. Anyone have a copy? Mish

To: John McCarthy who wrote (93542)	2/21/2009 6:32:44 PM
From: axial	Read Replies (1) \| Respond to of 116555

First, Let’s Fix the Bonuses More: nytimes.com "It may seem hard to believe now, but Wall Street pay wasn’t always in the stratosphere. “When I became a partner at Lazard in 1961, my salary was $51,000,” recalled Felix G. Rohatyn, perhaps the best-known investment banker of his era. “And until I left the firm in 1997,” he added, “my compensation was always based on what percentage interest I had in the firm. Everybody was working for the greater interest of the firm.” And why wouldn’t they? Like all Wall Street firms in those days, Lazard Frères was a private partnership. Every year the partners drew a percentage of the annual profits as their compensation — but they also had to keep most of their capital in the firm until they retired. They had a keen interest in ensuring that the firm had a healthy, long-term future. Today’s bonus system is a warped legacy of those old partnerships. Starting in the 1970s, Wall Street firms began going public, which meant that the partners’ capital was replaced by shareholder equity. But the firms never abandoned the idea that salary was only a small portion of employee pay — and that the big payoff came at the end of the year at bonus time. In addition, trading began to overshadow advising as an investment bank’s primary way of making money. Valuable traders whose operation made hundreds of millions of dollars for their firms demanded a significant piece of those profits for themselves — or they took their services elsewhere. So that quaint notion that the firm’s long-term health came first slowly gave way to a more cutthroat ethos. Whereas the incentives during the partnership era fostered loyalty to the firm, the new incentives turned everyone into a greedy free agent like, say, Alex Rodriguez." --- (Emphasis added) Jim