Wednesday, October 31, 2007

Pollymath

From here:

Bonuses that hit an epic £14m last year may drop this year,


I think you may be out by a small thousand-fold. An excellent achievement, even by your standards (although Bishop Ussher still, for me, holds the record at over 800 thousand-fold.)

but not because managers or CEOs are doing their job less well. Sub-prime mortgage lending in the US is hardly their fault. This will show that the "performance-related" bonus culture is nonsense.


Err, nonsense. It could be either because companies have less profit (possibly) because of the general market conditions, therefore (quite rightly) less in the bonus pool or because bonuses may be tightly linked to share price, therefore the general fall in the market does actually count as "doing their job less well" (their job being to increase the market value of the shares) even if it is "hardly their fault".

Update: Edited to correct my math - £14b is not 1000% of £14m, it is 100,000% - therefore her error is 99,900% rather than my initial 999%.

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