Incentives :: Spero Consulting

September 2010
S	M	T	W	T	F	S
« Aug	«-»
	1	2	3	4
5	6	7	8	9	10	11
12	13	14	15	16	17	18
19	20	21	22	23	24	25
26	27	28	29	30

This is So Cool!

Andy Spero | April 21, 2010 | 0 Comment(s) |

Our Dissertation is on-line in Korea

We rarely “Google” our name, but today we did so out of curiosity.

We had thought it had been forgotten; so, we were surprised to find that a scanned version of our doctoral dissertation is available on-line at the library at Pai Chai University in Korea and at Google Docs, too.

We’ve never heard of Pai Chai, but attribute that more to our sheltered existence than anything else. (If we had to guess, we suspect “Pai Chai” means “peaceful tea,” but then we’ve… Read the rest

The Volcker Rule: Obama’s Right…

Andy Spero | January 22, 2010 | 0 Comment(s) |

…To Propose a Ban on Prop Trading at Insured Institutions

We applaud President Obama’s proposal to eliminate proprietary trading at insured institutions. In fact, long-time readers will recall that we first recommended a ban on this site on October 1, 2008–near the height of the financial panic.

Our reasons are simple.

One can argue about the need for federal deposit insurance, but if such insurance exists, we see no reason that tax payers should subsidize risk-taking at insured institutions. If one wishes to benefit as a ward of the state,… Read the rest

Inefficient Bonus Schemes

Andy Spero | January 13, 2010 | 0 Comment(s) |

The Outrage Makes Them Larger

Recently, much has been written about “Wall Street” bonuses. Almost all of those articles mention the same two things: (1) populist and government sentiment against the bonuses, and (2) the composition of the bonuses towards long-term, restricted stock and away from cash. At least some of the drive towards a more stock-heavy composition seems to be management’s attempt to appease the government and the public. In this post, we argue that such moves are needlessly costly, which means inefficient and larger than need be.¹… Read the rest

Incentives and the Financial Crisis

Andy Spero | May 29, 2009 | 0 Comment(s) |

There’s an excellent opinion column in yesterday’s (May 28) edition of The Wall Street Journal. It is Crazy Compensation and the Crisis by Alan S. Blinder.

Why do we write that it is “excellent” the dear reader may ask?

Well, for the obvious (and self-serving) reason that we have been writing the same critiques on these pages for much of the past year or so.

Mr. Blinder identifies several problems that created the potential for the crisis and its subsequent realization.¹ We will categorize the problems that he identifies… Read the rest

Business Schools, Incentives, Uncertainty, and the Financial Crisis

Andy Spero | April 30, 2009 | 0 Comment(s) |

What Should It Mean to Earn a Master’s Degree?

We don’t answer that question here, but shouldn’t one be required to master something?

It Was a Matter of Time

Since early October, we’ve wondered when we’d see the first editorial criticizing MBAs and business schools for their role in the ongoing financial crisis.¹ In our mind, much of the blame should be shared between business types, i.e., MBAs, and so-called “quants,” with the majority of the blame placed on senior managers who permitted lax controls and misaligned incentives to… Read the rest

Everyone Has Their Own Reasons

Andy Spero | December 7, 2008 | 0 Comment(s) |

Does the Sum of Idiosyncratic Decisions Mean Anything?

There’s an article in the weekend edition of The Wall Street Journal, entitled, It’s a Done Deal: Merrill and BofA. It is subtitled, “At Thundering Herd’s Last Meeting, Thain Presides Over Sadness and Anger.”

In previous posts we’ve already commented on a variety of related topics, including our dislike of mega-mergers, which concentrate idiosyncratic decision-making and exacerbate moral hazard issues. (For merger-related issues, see: Forced Mergers? Bigger Is Not… Read the rest

Should Citi Be Nationalized as a Warning to Others?

Andy Spero | November 21, 2008 | 0 Comment(s) |

Note: We’ll likely expand and edit this post in the morning, but wanted to circulate the idea before bedtime.

We’re rather diligent–but not obsessed– about keeping up with financial new.¹ We’ve heard many financial firms announce lay-offs and have read how at a few, like Goldman, senior managers have decided to forgo bonuses.

As we recall, most banks have announced withdrawals from subprime mortgage origination and loans, which seems like a wise move, but given the magnitude of their errors and mistakes, we’re very surprised that we haven’t read… Read the rest

SOX's Roles in the Financial Crisis of '08

Andy Spero | October 3, 2008 | 0 Comment(s) |

Did SOX Exacerbate the Crisis? and…

The Best is Yet to Come, Oh Yeah!

We don’t mean any baseball teams, we mean the Sarbanes-Oxley Act of 2002, which President Bush said at the time of its signing was “the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt.”

Here is a description from Wikipedia: “… in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Read the rest

Freddie Mac + Fannie Mae = Not Much Value

Andy Spero | September 8, 2008 | 0 Comment(s) |

As regular readers know, our professional interests include incentives and understanding the implications of particular compensation schemes and performance measurement systems. Moreover, we like to think about these issues for market-related activities like trading and investing and risk management.

In this post, one day after the United States has basically (and almost formally) nationalized Freddie Mac and Fannie Mae, we begin by asking the dear reader a simple history question.

See, we need to ask the question because our dissertation and much of our doctoral training involved information economics, and our degree wasn’t… Read the rest

Fixing Self-Created Problems in Organizations

Andy Spero | August 26, 2008 | 0 Comment(s) |

There is a very nice article in Monday’s (August 25) The Wall Street Journal, entitled “Münchhausen at Work” by Phred Dvorak. He describes situations where workers consciously create problems and then provide solutions in hopes of recognition and rewards. When creating the problem the employee attempts to be secretive, but sometimes cameras and colleagues get in the way. The employee then solves the problem in a visible way to make recognition and positive feedback easier to obtain.

Because the topic involves incentives, it is very close to our small, black heart. We like the column but have a few comments and… Read the rest

Search

Our Other Web Sites

Translator

Page Navigation

Categories

Previous Posts

Switch site

Sign-up for Our RSS Feed