As Wall Street bonus season comes into full swing, UBS AG is
the latest bank doing things differently to reel in excessive pay. According to Fortune on Tuesday,
the Zurich-based bank announced plans to pay some of its top employees' bonuses
in bonds.
The move is something regulators have called for. Unlike
stocks, debt-based bonuses discourage traders and bankers from taking on the
kind of risky bets that helped drive the U.S. economy into financial disarray.
After all, bonds have fixed payoffs; they don't go up.
The reality, however, is that Wall Street bonuses have
gravitated toward deferred bonuses, like stock options, since the financial
crisis. Because they tend to be tied to the firm's long-term performance, it
makes them far less excessive than cash bonuses. However, unlike bonds, the
payoff from stocks has the potential to rise. Which makes traders and bankers
very happy, but it also gives them every incentive to take on business risks to
see their banks' stock soar…..
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