“Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry

“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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Auteur principal: Godechot, Olivier
Format: Article ou chapitre numérique
Langue:Français
Publié: 2009
Accès en ligne:Accès Université d'Orléans et IFPM
Accès Université d'Orléans et IFPM
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spelling cairn-RFS_495_0095RFS1Revue française de sociologie https://shs.cairn.info/revue-francaise-de-sociologie-1-2008-5-page-95?lang=en https://doi.org/10.3917/rfs.495.0095 “Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry Godechot, Olivier2009 fre Revue française de sociologie | 49 | 5 | 2009-01-21 | p. 95-123 | 0035-2969 RFS_49572 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.Cairn free access
language Français
format Article ou chapitre numérique
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1/Bibliothèque numérique/Cairn/
description 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.
author Godechot, Olivier
spellingShingle Godechot, Olivier
“Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry
author_facet Godechot, Olivier
author_sort Godechot, Olivier
title “Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry
title_short “Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry
title_full “Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry
title_fullStr “Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry
title_full_unstemmed “Hold-up” in Finance: The Conditions of Possibility for High Bonuses in the Financial Industry
title_sort “hold-up” in finance: the conditions of possibility for high bonuses in the financial industry
publishDate 2009
container_title
container_issue
url https://ezproxy.univ-orleans.fr/login?url=https://shs.cairn.info/revue-francaise-de-sociologie-1-2008-5-page-95?lang=en
https://ezproxy.univ-orleans.fr/login?url=https://doi.org/10.3917/rfs.495.0095
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