US
Imagine the scenario – you’ve finally managed to claw your way to the top of the investment banking tree, leaving a trail of vanquished competitors and enough burned midnight oil to fill the Mediterranean. This is where the big bucks really start rolling in. But, your newly substantive bonus will be paid predominantly in stock…and you won’t be able to cash it in until you retire.
This is one of the more inflammatory proposals from Goldman chief exec Lloyd Blankfein’s otherwise relatively anodyne speech at the Handelsbatt Banking Conference in Frankfurt yesterday.
Blankfein is suggesting that senior executives officers should mostly be paid in equity and only able to cash in the bulk of this when they retire. This deal is maintained, even if you leave the company.
Could you wait until you retire to access the fruits of your labour? Is the main motivation for working in banking swift access to relative wealth? Do you think such a system could put people off working in investment banking? Your thoughts please…
Are you joking? I’d become a zookeeper.
It’s a novel ideal and one that would inspire prudent risk taking if your personal wealth was truly tied to the long-term prosperity of the company. In reality though, I doubt many people would want to want their bonus to become a pension, no matter how happy a retirement you might have.
You would have thought Blankfein had studied some basic lifecycle micro and macro theories and understood most people have a very high discount rate on future vs. current consumption so as to attribute only limited value to even a large amount 30 years out. I.e. the promise of large bonuses to be paid that far out even if substantial would likely only have limited behavioural effects. Bonuses with limited or no incentive effects defy the purpose. Completely pointless.
Ari hits the nail on the head. Why would one work so hard in this field if one only sees the fruits of their labour after retirement? Rather work in the NHS! The DB pension would ensure my retirement is relatively comfortable anyway….