The Financial Times notes that not too long ago Wall Street firms argued to shareholders that they had become much better about managing risk and paying employees flexibly, allowing for sharp cuts during downturns. True? Well, you're right to be a bit skeptical about the first one, though Goldman Sachs may give you pause. As for the second, it would seem that the bonus system works well. Employees gain only if the firm gains. But how do you explain the fact that at some firms, compensation has soared as revenues plunged? Morgan Stanley's wage and bonus costs rose 18 percent to $17 billion, as revenues fell 6 percent. This may be inevitable; Employees gain when the firms makes money, but they are not forced to pay when the firm loses money. Instead of merely giving up bonuses, should John Mack and Jimmy Cayne be asked to kick in capital? That's not going to happen.   

For more:
- here's the Financial Times article