Monday, September 28, 2009

Lap dancing and Wall Street pay

Lap dancers receive performance-related pay. Miserly and overenthusiastic customers aside, they get £20 a lap dance and £200 a half-hour of what I will call “dedicated time”. The more beautiful, charming and determined the dancer, the more lap dances and “time” she will sell, and the more she will earn. By allowing a woman with these qualities to work in his club, (the owner) puts her in the way of potentially large cashflows.

The same goes for investment bankers. Their roles vary, of course, but they can all earn bonuses for their performance. A foreign currency trader, for example, typically is paid a bonus equal to about 15 per cent of the revenue he generates for the bank. The leader of a mergers and acquisition team will make some percentage of the bank’s fee for a successful deal, which can be astronomical. By giving someone a job at an investment bank, its owners are putting him in the way of potentially large cashflows.

But here is one of the many differences between lap dancers and bankers: whereas (the owner) makes his lap dancers pay for the privilege of being put in the way of their bonuses, with a “house fee” of about £100 a night, investment bankers are actually paid to have the chance of earning bonuses in the millions, with base salaries ranging from roughly £50,000 to £200,000.

This is silly. Investment bankers, like lap dancers, should have to pay to go to work. This would settle the issue with which Messrs Brown, Sarkozy and Obama have been struggling, by ensuring that bankers are paid just the right amount and not a penny more (or less).

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