Sunday, March 01, 2009

Is Retention Pay a Good Idea?

Should Wall Street brokers at firms receiving federal bailout funds receive billions of dollars in retention packages as incentives for them to stay with the companies into the future?

"Top brokers at Morgan Stanley and Citigroup's Smith Barney, which are to join forces in a joint venture later this year, learned last week that they will receive packages worth 105 percent of their annual revenue. That means a broker who brought in $2 million last year would get $2.1 million. Much of it will be awarded next year, and the remainder in 2012. The award would have to be paid back to the firm on a prorated basis if the broker were to leave before nine years. Brokers who make less money will be offered smaller packages. All told, 6,500 out of 20,000 brokers at the two firms will be offered a retention package," according to the Washington Post.

Some of those favoring retention packages consider them valid recruiting and retention tools to keep brokers from being recruited away by competing financial institutions.

Some of those opposed say they continue to reward a broken system and may even harm talented workers by restricting their job mobility.

Ever heard of Golden Handcuffs?

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