An oxymoron takes root
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An oxymoron takes root

The guaranteed bonus, like the jumbo shrimp and military intelligence, is a bit of a contradiction in terms. A bonus implies something given as a reward for exceptional performance. Guaranteeing it makes it more of a right, like a normal salary. But the business appeal of this catchy oxymoron is in high vogue on Wall Street as firms respond to the lure of dot coms. In years’ past only a few firms would be paying guaranteed bonuses, often during a rapid build-up and to compensate new hires for the risk of joining from established firms. Such guaranteed pay-outs were regarded as a sign of weakness. Now they have become commonplace. James Smalhout reports

The eye-popping numbers involved with annual bonus payments in the securities industry each year leave even hardened veterans agog. But gone, at least for this year and a few more to come, will be much of the usual gut-wrenching suspense and pathos at bonus time. Pleasant surprises, in the world of compensation management, are a waste. The key challenge for financial firms most of the time is to meet the expectations of their people, and to pay no more.

"The only time I've ever seen a grown man cry," says one amused consultant, "was when an investment banker received a $3 million dollar bonus." They weren't tears of joy. The banker, it seems, had been expecting $5 million for the year on top of his salary. And Wall Streeters like him don't forget their disappointments. They have a nasty habit of walking out.

"Bonuses are misunderstood," says Alan M. Johnson, another New York-based compensation adviser who heads the firm that bears his name. "They seem so straightforward, but there's a general lack of clarity about what they are."

Those uninitiated in the ways of Wall Street can be forgiven for concluding that these payments are a type of profit-share, handy for controlling the bottom line.

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