Bankers' bonuses : limit or laissez-faire?

Résumé du document

Nowadays, we are facing the hugest crisis in history. To summarize the facts, the greediness of a few 'bankers' and the globalization of the economy are leading to many bankruptcies and redundancies. But are bankers' bonuses really a underlying cause of the current crisis ?

Extraits

[...] Secondly, as we saw that bonuses are essential, a solution would be not to abolish this system but to modify it. In fact we can imagine that traders or fund managers should invest a part of their own assets in the funds they manage, in order to make them much more motivated, “invested” in their search of the best investment and especially aware of risk. Besides, the staggering of the payment of bonuses on at least three years would urge traders to be more careful to favour more long term investments; and not only choose short term investments which will make them earn more with their year-end bonuses. [...]

[...] Then traders invested a huge part of banks assets in these products, while CEOs of these banks generally did not even know how all this really work. But US rates rose, many people could not refund their mortgages, credit derivatives prices fell down, banks faces big losses and bad debt ratios which leaded to a confidence crisis, and then a credit crunch who affected the economy. Thus, in this phenomenon bonuses urged traders, looking for high yield assets which could make them earn more bonuses, to invest in these risky products. After which banks face big losses but traders did not. [...]

[...] Les bonus de Bankers - limitation ou laissez-faire? Nowadays, we are facing the hugest crisis of the History. To summarize facts, the greediness of a few “bankers” and the globalization of the economy leaded, and are still leading to many bankruptcies and redundancies. Obviously, to find guilty when things go wrong is part of Man nature; And choosing richer people for it too That is why the financial elite and her huge bonuses is the ideal guilty. But are bankers' bonuses really a underlying cause of the current crisis ? [...]

[...] Nicolas Sarkozy followed him a few days later with the same bill. But as far as United States are concerned, the senators Jim Webb and Barbara Boxer introduced, in the beginning of February, a bill would tax 50% of the part of bonuses above Hence we can guess where European best fund managers will work in the coming years Then what would be the solutions, and their possible pitfalls ? First of all, according to me, the most important improvements should concern the risk management. [...]

[...] But on the other hand I think that CEOs bonuses are too huge, given the real impact of their decisions on the profits of financial institutions; and especially as far as golden parachutes are concerned for business in deficit Even so, are bonuses bad or useless? And what would be the consequences of their abolition or restriction? Contrary to what public opinion could think, different studies carried in United States and Europe showed that surprisingly bonuses have desirable effects on effort, risk-taking, and fundamental orientation on both sides of the Atlantic. These studies established that bonuses are the dominant factor in eliciting working effort. [...]