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Why Wall Street bonuses are different

Marketplace Staff Nov 2, 2009
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Why Wall Street bonuses are different

Marketplace Staff Nov 2, 2009
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TEXT OF INTERVIEW

Steve Chiotakis: Remember when bonuses were all about a modest reward for hard work and energy?
Not anymore — at least on Wall Street, where making millions is par for the course. It’s been a sour point for the majority of those who
don’t work on Wall Street. Fortune Magazine’s Allan Sloan’s been taking note of this big gap at Wall Street and Main Street. He joins us now. Good morning, Allan.

Allan Sloan: Good morning, Steve.

Chiotakis: I’m curious about this, because we know how these bonuses work on Wall Street and all that. But how did these bonuses get to be millions upon millions of dollars?

Sloan: Well it’s a formula. Now, a million years ago, when Wall Street was private, and people wanted to keep their fixed costs down, you worked for basically survival wages, and then you got a piece of the action afterwards. Now that most of these companies are stockholder-owned, they have a bonus. And on Wall Street, bonus does not mean what it means in the real world.

Chiotakis: So what’s the difference then?

Sloan: In most of the real world, a bonus is something for extraordinary effort and extraordinary accomplishment. And it’s a bonus! On Wall Street, it’s generally part of your base pay, they just call it a bonus for historical reasons. And the word “bonus” itself is complicating the relationships because Wall Street guys feel entitled cause they consider it compensation. And people on Main Street who don’t know this world — no reason they should — think it’s outrageous because what do these people done other than take government bailout money?

Chiotakis: But it still feels like there’s this tension here. I mean what should we do about these bonuses? Should we call them something else?

Sloan: First we should call them something else. But I was an English major, and I actually care about words. On Wall Street, they care about money. That’s why they don’t call them something else. Second, at least this year, the real heavy hitters in these firms ought to be smart and take nothing in the way of bonuses, and say, “We got so much money from the government, and we benefited so much, that the money we would normally pay as bonuses, we’re paying to the U.S. Treasury. Now I think there are two chances of that happening: slim and none. But I think that’s what I would do if I were running a Wall Street firm. Then again, that’s why I’ll probably never run one.

Chiotakis: Fortune Magazine’s Allan Sloan with us this morning. Allan, thanks.

Sloan: You’re welcome, Steve.

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