Future of Forecasts

by Chidem Kurdas

‘Tis the season for predictions. Pundits offer conjectures on every conceivable subject, though accumulating evidence in recent years has established, as much as anything can be established, that you might as well examine tea leaves to divine the future. Yet one could learn from prophesies; a few are thought provoking and some may even be true. Continue reading

Beating Bonuses into Risk Controls

by Chidem Kurdas

Deferred vesting of stock options is not a new idea—it gained currency amid the corporate scandals that emerged in the aftermath of the late 1990s stock bubble. It appears to be making more inroads at present, in the aftermath of the twin credit and property bubbles.

This growing practice is not confined to Wall Street, but financial firms are the forefront.  Given that bonuses, and hence stock awards, tend to be by far the largest portion of managers’ pay in the financial industry, the restrictions have the potential for curbing bad behavior in the future.

This may be the one useful result of public anger over outsize compensation and the political grandstanding it has occasioned. It could go some way to reduce the perverse incentive created by the government safety net and cheap federal loans, which are in effect an invitation to put the money to use in lucrative but hazardous ways. Continue reading