Just Compensating

Daniel Gross, at Slate, wrote a Moneybox commentary on Wall Street bonuses. He makes a point in it that I did not realize:

At most companies, bonuses are paid out of profits. No end-of-year profits, no bonuses. But on the island nation of Wall Street, they’re paid out of revenues.

Bonuses out of revenues, what sort of nonsense is that? No wonder they can pull down ridiculously obscene compensation. Let’s see – we are doing a 10 billion dollar refinancing, we want 10% to do it and 50% of that will go into the bonus pool. The other 50% will go to pay for the office building, the corporate jets,  the million dollar salaries; your basic operating expenses. Anything left over would be profit. How do they get away with it?

Since the 1980s, notes Brad Hintz, an analyst at Sanford C. Bernstein, it’s been the standard for half of revenues to be devoted to compensation. So long as these outfits were private partnerships, that practice didn’t really matter to the rest of us. But since the 1990s, when investment banks went public, compensation has evolved into a zero-sum game between employees and shareholders. Guess who lost?

Any compensation in excess of the annual presidential salary is not deductible from corporate ledgers and the corporation must pay corporate taxes on excessive compensation.

Space-Time Continuum

It it very hard to describe the difference in scale between East and West. Back East, time is the critical factor; out West, it is space.  The balance of the time-space continuum defines how we allocate resources.  In the East it may take 10 minutes to go a mile, just popping down to the grocery store. Out West, I’ve gone 10 miles in 10 minutes and I still haven’t got to the grocery store.

When trying to solve the problems of traffic, pollution, and public transportation,  please remember that one size does not fit all.