“Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry
Pay in the financial industry can be very high, and understanding how it gets determined is a key to understanding the wage labor nexus. The fact that some employees acquire “holdup” power is more relevant in explaining this phenomenon than the idea of optimal effort incentives. To better understa...
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| Format: | Article ou chapitre numérique |
| Idioma: | Français |
| Publicat: |
2009
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| Accés en línia: | Accès Université d'Orléans et IFPM Accès Université d'Orléans et IFPM |
| Sumari: | Pay in the financial industry can be very high, and understanding how it gets determined
is a key to understanding the wage labor nexus. The fact that some employees acquire “holdup” power is more relevant in explaining this phenomenon than the idea of optimal effort
incentives. To better understand the mechanism, an exemplary case of hold-up is studied:
two heads of a trading room in a major French bank were granted bonuses of € 10 million
and € 7 million respectively for the year 2000 by credibly threatening to leave for a rival
bank with their entire teams. The hold-up mechanism can be outlined on the basis of this
case: having control over transferable assets makes it possible for employees to threaten to
inflict damage on a company if it refuses to accept a contract renegotiation favorable to the
employee. The hold-up mechanism is particularly likely to operate if protections against it
are weak or ineffective. This leads to viewing the financial industry job market differently,
less as a market of persons and personal skills than a market for company assets produced
and carried by persons who organize their transfer. |
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