If they really wanted to align executive interests with shareholders, they should do what Buffett does and simply not pay out the bonus until 5 years later. Paying bonuses now with some ill-defined option of clawing them back later is an accounting contortion whose sole purpose is to allow bonuses to be paid this year while hoping / praying that conditions improve the next several years so that they can quietly discard this policy and go back to the usual beggaring of their shareholders and clients when the current public scrutiny has died down.

UBS and every other major financial instituition engaged in massive off balance sheet transactions and OTC markets knowing that this could one day blowup. Management knew about it and new that everyone else was doing the same thing.

The problem is not that UBS or any other bank for that matter, “cant” assess the profitability of its current business, but the problem is that pay structure is such that the controls are not enforced since management itself also benefits in high short term payouts that can dwarf any longer term considerations.

I think it is correct to have top manager compensation more in line with potential future losses generated in their businesses. Whether this means longer term investment periods for bonuses or clawbacks will be seen.

Stockholders who are unnerved by these proposals may be overlooking the evidence that the new rules are “. . .designed to align the interests of executives and traders with those of stockholders.” To me, at least, this appears to be a move intended, in part, to generate fresh infusions from the capital markets.

I’m not so sure I agree, e.g. with the part about asking for the money back. Presumably UBS had risk management structures in place; were they violated? Is there evidence of such malfeasance? Or of anything criminal? I can understand the feeling behind the move, if less so the logic. It strikes me somehow as petty, small-minded. How do they expect to recruit people to work for them with such policies in place? In the ‘past results are no guarantee of future returns’ sense. Anyway, more of what you’ve come to expect from these shallow clowns in finance.

This year UBS has seen “losses at group … level”, right? So is UBS saying that it’s going to distribute maluses to all of its employees this year? Of course not! Bonuses will just be “down” from last year.

Can we “malus” the Secretary of the US Treasury? Afta’ all, don’t we pay him?

Maluses is a good concept that needs to be drilled into the American public consciousness. any bets on that working?

Thanks for posting this Yves. It did brighten a fairly dismal day.