Information Assymetry and Pay For Performance Question

Information Assymetry and Pay For Performance Question -...

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(15 pts) Read the following excerpts on Wall Street Pay and answer the associated questions below: Greed Is Good by Roy C. Smith Monday, February 9, 2009 Roy C. Smith, a professor of finance at New York University's Stern School of Business, is a former partner of Goldman Sachs. “Wall Street bonuses are getting a bad rap, but they're an important and useful part of the financial services industry. Taking them away could hamper the economic comeback. 1973 was a terrible year on Wall Street. An unexpected crisis in the Middle East led to a quadrupling of oil prices and a serious global economic recession. The president was in serious trouble with Watergate. The S&P 500 index dropped 50% (after 23 years of rising markets), and much of Wall Street fell deeply into the red. There were no profits, and therefore no bonuses. I was a 35-year-old, non-partner investment banker then and was horrified to learn that my annual take-home pay would be limited to my small salary, which accounted for about a quarter of my previous year's income. Fortunately the
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Information Assymetry and Pay For Performance Question -...

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