Magazine article The Wilson Quarterly

Don't Blame Bonuses

Magazine article The Wilson Quarterly

Don't Blame Bonuses

Article excerpt

THE SOURCE: "Bankers' Bonuses and the Financial Crisis" by Ian Tonks, in Vox EU, Jan. 8, 2012.

EVERYONE HAS A THEORY ABOUT what caused the 2008 financial crisis. One idea that's made the rounds is that the money flashed at bank executives in the form of salaries and bonuses encouraged them to take big risks that maximized short-term profits at the expense of long-term viability. The U.S. Financial Crisis Inquiry Commission asserted as much when it connected the crucial 2008 failure of the investment bank Lehman Brothers in part to an executive compensation scheme "that was based predominantly on short-term profits." In the United Kingdom, the chairman of the Financial Services Authority linked "inappropriate incentive structures" with risk-taking and the financial turmoil of 2007-09.

The finger-pointing may be unwarranted, says University of Bath finance professor Ian Tonks. The financial sector differs from other corporate sectors "not so much in its reward for taking risks, but in its reward for expansion," he writes, summarizing research he did with several colleagues. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.