Saturday, November 21, 2009

Financial Wizardry

I'd still like to know how in the world shareholders get suckered in to paying out such absurd salaries and bonuses to captains of the financial industry. The standard explanation is that good ones can bring in millions - even billions - for a company. But what does this have to do with the market value of each hiree?

I assume that prospective hires can demonstrate past success - and that compensation structures have to be competitive with other companies. But it all seems so arbitrary. It is a fact that the financial industry is incredibly nepotistic - many traders have little or no education and were hired based largely on who their father, friend or neighbor was.

It seems shareholders could easily pay millions of dollars less for people just as talented & who will work just as hard. Yet one must have a successful record, and thus have worked for some company - and that company was already in the position of paying outrageous sums to their employees. What are the starting salaries at these places? How did the incentive structure become so absurd?

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