These stories always require caveats. Were bonuses out of control? Absolutely. Personally, I think firms with federal bailout money should hammer down, even eliminate, bonuses this year, with the caveat that they should do so extremely carefully. After all, since we taxpayers essentially own the joints now, it would be nice to know that next year the best talent will remain so we can get our money back. (Of course, determining the best talent is a swamp too, particularly in firms so tied to changing markets.) It's a cliché, but as shareholders, why would we cut our nose off to spite our long faces? And the argument that these fat cats have nowhere to go only holds true as long as the slump continues. Once the economy improves (which it will, eventually) what will keep the best talent from fleeing to a place that does pay well?
I guess we could remedy this by limiting everyone's compensation, but then we'd have to go out and conquer the world to make sure it sticks.
In fact, the Times is essentially making an argument that's quite common, if about as subtle as a baseball bat to the head: that there's a sense that Wall Street must bear collective responsibility for the goings-on of, say, the last few decades. The fact that these firms are large, complex, and that individuals undoubtedly had a wide range of responsibility for some of the disasters -- more at the top, less at the bottom -- doesn't really matter to the scourges of compensation. Does an investment banker working on healthcare M&A bear the same responsibility as a banker in mortgaged-backed securities? How culpable is a secretary or an associate? It's a lot more honest, if not fair, to admit that we're slashing everyone's bonuses to save money to get through the storm.
Then there's shareholders. Two groups on Wall Street profited from the boom: employees and shareholders. It's OK to hammer employees for collective responsibility, but no one's talking about the nice ride shareholders took for so many years. But, you say, shareholders have since been creamed. Well, some have, theoretically the dumb ones. Shareholders who sold out over the years presumably did just fine. And it's not like over 60,000 Wall Streeters haven't lost their jobs. Should we try to claw back gains from shareholders who cut and run? After all, as written into governance lore, shareholders are the ultimate owners and monitors of corporate performance. Now there's collective responsibility. But shareholders, you say, have a responsibility to try to sell at the top. Well, right. Which is why they're often lousy, and short-term, corporate overseers.
Still, the most aggravating notion advanced by the Times is the uncooked idea that the boom was a fiction. Well, again, right. All markets are fictions, until you sell, and then they're a fact (and not a "fact" like Bernie Madoff's books). Is the boom any more ephemeral than the current bust? It is if you're out of work right now. But then the gains from the boom years that people and firms booked, and the taxes paid to the government on that income, were pretty real too. And the boom that we pray will follow this bust will be real in that sense as well. Fact and fiction, reality and illusion are simply the wrong conceptual terms for the actions of the marketplace that we insist on using as a handy, one-size-fits-all metric. If we're talking "real," cash is real, stocks are less real. The reality of the market only lasts as long as it remains fixed, that is, before it staggers off on its random walk, seeking free booze at someone else's Christmas party.
All of this helps explain why compensation is such a difficult issue, despite the endless sermonizing on the subject.
One last thought: The real joke here is that the notion of an ephemeral boom and a tangible bust taps into the same set of beliefs that led us astray in the first place: that the market is the efficient judge of all reality. Funny how we always end up there. - Robert Teitelman
Robert Teitelman is the editor in chief of The Deal.
There is nothing like a bonus story to lead us into the conceptual swamplands. 
