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End Bonuses For Bankers
theodp writes "NYU risk engineering prof Nassim Nicholas Taleb has a suggestion that won't sit too well with the banksters. In his NY Times op-ed, Taleb writes: 'I have a solution for the problem of bankers who take risks that threaten the general public: Eliminate bonuses.' The problem with the bonus system, Taleb explains, is that it provides an incentive to take risks: 'The asymmetric nature of the bonus (an incentive for success without a corresponding disincentive for failure) causes hidden risks to accumulate in the financial system and become a catalyst for disaster. This violates the fundamental rules of capitalism; Adam Smith himself was wary of the effect of limiting liability, a bedrock principle of the modern corporation.'"
If the problem is no corresponding disincentive for failure, it doesn't make sense to remove the incentive for success.
Instead, should unwarranted bonuses be given that later turn out to be fraudulent, the bonuses should be clawed back. Perhaps add a penalty of 50% of the bonus on top of clawing back the full bonus.
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Also when a corporation is executed, all the internal contracts between the board and top executives on one hand and the corporations on the other would be null and void. Thus they don't get their golden parachutes.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
I'm a voracious reader. I figure I've easily read thousands of books in my life. My top ten list (hey, I'm a nerd) of most thought-provoking books I've ever read are:
10. Why Societies Need Dissent - Cass Sunstein
9. The Road to Reality - Roger Penrose
8. Diplomacy - Henry Kissenger
7. Last Chance to See - Douglas Adams
6. Free to Choose - Milton Friedman
5. Cosmos - Carl Sagan
4. Guns, Germs, and Steel - Jared Diamond
3. Black Swan - Nassim Nicholas Taleb
2. Meditations - Marcus Aurelius
1. Bible (KJV)
You are doing yourself a disservice if you don't read Taleb. He is one of those rare authors who doesn't just serve up facts, but fundamentally alters the way you see the world.
That's true. The system we have *now* in most of the world is basically "stone cold capitalism for the people" and "cosy socialism for the corporations"
That is not a property of capitalism. As someone else has pointed out that is a property of a political system wherein certain groups of people ask the political class to exercise more power every time there is a problem that results from the political class abusing its power.
The truth is that all men having power ought to be mistrusted. James Madison
This is not true.
Historically, corporations were required to be non-profit and demonstrate that their existence served the public good to be registered.
"In the United States, government chartering began to fall out of vogue in the mid-19th century. Corporate law at the time was focused on protection of the public interest, and not on the interests of corporate shareholders. Corporate charters were closely regulated by the states. Forming a corporation usually required an act of legislature. Investors generally had to be given an equal say in corporate governance, and corporations were required to comply with the purposes expressed in their charters."
You believe that the way things operate are fundamental because you were programmed to believe that by those who have been exploiting you since you were born.
I'd say that this is a property of a certain subset of capitalism where influence of the political system is treated as any other good. That is to say, buy what you can afford, at whatever price it's worth to you.
The libertarian approach is to weaken government to the point where it can no longer aid corporations in their corruption. The liberal approach is to not treat it as a free market good. I can't for the life of me figure out what the conservative approach is. Seems to be, "What's the problem again?"
You want the truthiness? You can't handle the truthiness!
Essentially the corporation will be broken into divisions and sold off in pieces. Most of the actual productive jobs will remain. We have quite good knowledge, experience and track record of breaking companies into smaller pieces. In the long run, the competition creates more jobs and more vibrant economy. When AT&T was broken up by court order, and before the baby bells re-agglomerated into Verizon, we had a nice trajectory of falling prices and improved services.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Bullshit. Their stress is nothing compared to what we routinely ask soldiers, detectives, judges, and other people to do for a fraction of the pay.
You're posting this on a website full of people who think sitting at their desk typing commands into a terminal window is stressful because their boss might get mad at them ... this group has no idea of what REAL stress ... like that of doctors and soldiers ... where people live and die by their hands ... do.
Persistent Volume manager for Kubernetes - https://github.com/dwimsey/openshift-pvmanager
True, but I think Taleb's point was to cut both Bonuses and Salaries to make Bankers "Lifers". He explicitly points out that a lot of banking employees would leave, and hedge funds (which need not be bailed out) will pick up the risk that banks lay off.
I believe this is how it would work out according to Taleb.
1) Banks cut salaries/bonuses
2) Lot of workers leave
3) The banks can't do much else other than old fashioned banking
4) Hedge funds partnership based pick up all the "cool stuff"
5) Since partnerships and hedge funds do not have "Limited Liability" , they are much more careful
The Atlantic article is incorrect in using the Lehman example. Taleb's point is that a partnership with unlimited liabilities would never have gotten into the situation Lehman got into. He does not say that Lehmans corporate structure mattered in any way after Lehman got into the situation it did.
Unlimited liability + Bonus is a very different incentive compared to Limited liability + Salary which are both better than Limited liability + Bonus.
If you were a trader who could do a billion dollar trade that had 50% chance of winning that would fetch you a million dollar bonus and 0 liability (except loss of job which pays you 100K a year), you would likely take the trade if you thought of sticking to the job only for 5 years. But you would be less likely to take it if you had unlimited liability.
http://slashdot.org/submission/1062723/Cheap-mobile-data-plan?art_pos=2
Well they are doing exactly what they were meant to do just
like the 21 other instances of major inflation in the past 25 years.
As John Perkins clearly explains the economic destruction of
nations has been by design.
http://www.youtube.com/watch?v=yTbdnNgqfs8
google "32 trillion offshore needs IRS attention"
Let me get this logic straight:
-A corporation gets so large that it is literally able to warp the space/time continuum of political power. They are able to buy off the puppet politicians and get whatever laws they want passed.
-One of your answers to this situation is to have the puppet politicians take complete control of the corporation. The other is for the puppet politician to break his master into pieces.
Would removing the ability of the puppet politician to work on behalf of his corporate overload be an option?
Aah, change is good. -- Rafiki
Yeah, but it ain't easy. -- Simba