NO RHYME OR REASON: The 'Heads I Win, Tails You Lose' Bank Bonus Culture, Andrew M. Cuomo, Attorney General, State of New York [Report Was Previously Transmitted to House Oversight and Government Reform Committee, Chairman Edolplhus Towns (D-NY)]
As part of this review we have also been examining the compensation structures employed by various banks and firms. Accordingly, over the past nine months this Office has been conducting an investigation into compensation practices in the American banking system. Wehave reviewed historic and current data on numerous banks' compensation and bonus plans. We have taken testimony from participants in all aspects of,the process, including bank executives who set and administer the compensation process, members of boards of directors who review company salary and bonus structures, compensation consultants who advise the companies, and the recipients of bonuses...one thing is clear from this investigation to date: there is no clear rhyme or reason to the way banks compensate and reward their employ~es. In many ways, the past three years have provided a virtual laboratory in which to test the hypothesis that compensation in the financial industry was performance-based. But even a cursory examination of the data suggests that in these challenging economic times, compensation for bank employees has become unmoored from the banks' financial performance. Thus, when the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished."