Log in

No account? Create an account
About those bonuses - Input Junkie
September 24th, 2009
10:29 am


Previous Entry Share Next Entry
About those bonuses
I just heard a bit on NPR which mentioned banks(?) which gave bonuses to people who talked home buyers into loans with higher interest rates than the buyers qualified for.

I haven't been able to verify this, but if it happened, it was quite a disgusting practice.

I'm wondering whether it would be a good idea to require that bonus schemes be made public.

Addendum: Check out Hard Facts, a book about research on what does and doesn't work in management-- it has quite a bit about how hard it is to devise an incentive scheme which actually encourages the behavior you hope you're rewarding.

(4 comments | Leave a comment)

[User Picture]
Date:September 24th, 2009 02:59 pm (UTC)
I'm generally of the opinion that _everything_ should be made public. You might be allowed an initial period of secrey for advantage while you gain market advantage - but after that short period it should all be transparent.
[User Picture]
Date:September 24th, 2009 03:57 pm (UTC)
I don't have the source anymore, save that it was cited by CBC's news magazine show "As It Happens", but apparently a third of subprime mortgages in the US were held by people who qualified for regular mortgages but were sold subprimes because of the incentives banks/lenders were giving to mortgage brokers and their own staff to move those types of loans.

Which, of course, completely screws over that third when the rate skyrockets... but the broker has already pocketed his/her money.

-- Steve's appalled at how busted incentive plans can be; look at how stock options worked out.
[User Picture]
Date:September 24th, 2009 04:10 pm (UTC)
I'm not sure whether there's a real distinction, but an incentive to "get as more for the bank" doesn't creep me out as much as an incentive to "stick the home buyer with a worse mortgage than they're entitled to".
[User Picture]
Date:October 4th, 2009 05:42 pm (UTC)
I definitely think that it's harder to create incentive schemes that reward what you're hoping to reward than people think it is. Cause-and-effect links are just much more subtle than people think. The example I always think of is my parents' cat. They didn't want her to go upstairs, so every time she went upstairs, they punished her by putting her outside. They thought she'd learn that cause (going upstairs) earns punishment (being put outside). And in a sense it worked--except that she learned it as a means of getting my parents to put her outside. When she wanted to go out, she'd thunder up the stairs and wait at the top for someone to come and put her out. (And when she wanted to have a quiet lie-down on someone's bed, she'd simply go up much more quietly.)

And with people's motivations, it gets infinitely more complicated.

Is Hard Facts the book in which a guy gets kids to stop egging his house by paying them to egg it, then gradually decreasing the amount he pays them to egg it on subsequent nights until they give up because the pay is too low? My son was telling me about that--crazy!
nancybuttons.com Powered by LiveJournal.com