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instance, on January 9, 2008 Raghuram Rajan wrote in FT: “Banks have recently been acknowledging enormous losses, yet those losses are barely reflected in employee compensation. For example, Morgan Stanley announced a $9.4bn charge-off in the fourth quarter and at the same time increased its bonus pool by 18 per cent." Can this quote help relating bankers' return (employees, NOT bank shareholders!) structure to one of the asymmetric information problems? If yes, why?

instance, on January 9, 2008 Raghuram Rajan wrote in FT: “Banks have recently been acknowledging enormous losses, yet those losses are barely reflected in employee compensation. For example, Morgan Stanley announced a $9.4bn charge-off in the fourth quarter and at the same time increased its bonus pool by 18 per cent." Can this quote help relating bankers' return (employees, NOT bank shareholders!) structure to one of the asymmetric information problems? If yes, why?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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At the end of 2007 the prevalent bankers' compensation structure came into spotlight. For instance, on January 9, 2008 Raghuram Rajan wrote in FT: “Banks have recently been acknowledging enormous losses, yet those losses are barely reflected in employee compensation. For example, Morgan Stanley announced a $9.4bn charge-off in the fourth quarter and at the same time increased its bonus pool by 18 per cent." Can this quote help relating bankers' return (employees, NOT bank shareholders!) structure to one of the asymmetric information problems? If yes, why?
Transcribed Image Text:At the end of 2007 the prevalent bankers' compensation structure came into spotlight. For instance, on January 9, 2008 Raghuram Rajan wrote in FT: “Banks have recently been acknowledging enormous losses, yet those losses are barely reflected in employee compensation. For example, Morgan Stanley announced a $9.4bn charge-off in the fourth quarter and at the same time increased its bonus pool by 18 per cent." Can this quote help relating bankers' return (employees, NOT bank shareholders!) structure to one of the asymmetric information problems? If yes, why?
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