Bonuses Without Profit!? Wall Street, Listen Up!

When it comes to Wall Street bonuses, you’ve probably been reading the same articles I have. The bottom line is that, despite the fact that most of the big Wall Street banks are only surviving courtesy of tax-payer handouts, the people who drove these businesses over a cliff, and had a hand in driving down the value of your home, are still raking in the big bucks.

Sure, you’ve seen a recent headline or two about this chairman or that CEO forgoing their 2008 bonus. Hopefully they didn’t squander too much of last year’s 30 million dollar bonus. But while bonuses may be down, they’re not out. According to an article I read today in Forbes, about 20 billion dollars was spread around New York City last month. And for an average banker with just 8 years on the job, the average bonus will be more than 600,000. In a year when many banks didn’t just lose: they had to borrow billions from us … from you and me … just to keep the lights on.

I’ve been thinking about how this could be possible, and I’ve come up with only one possibility: these New York guys, while obviously smart and well-educated, need a quick refresher in how bonuses work in the rest of the country. So grab your pencils and pads, banker-boys, and take some notes.

Here’s how it works. Let’s begin by talking about profits (because that’s where bonuses come from everywhere outside of Manhattan). Now think back to Harvard. Remember profits? That’s what you get when you bring in more money than you pay out. So just subtract the money your company lost from the money it made. And here’s the key, if it’s positive, you’ve got a profit. But if it isn’t, if it’s negative, you’ve got a loss.

Now here’s the next key point: a loss is bad. Why? Well, let me show you…

Because it’s a profit that allows you to reward those employees who helped create it. But if you’ve got an un-profit … a loss … you can’t pay a bonus because you don’t have any money to pay it with.

Now, you’re probably not going to pay attention to this … after all, I didn’t even make a million dollars last year, so what do I know? But if nothing else, at least you learned that if you expect to personally gain when your business loses…well, that’s only happening on one small island in New York. So don’t move anywhere else, ok? I’m Stacy Johnson, and that’s what I think.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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