Nomura, which has acquired Lehman's equities and investment banking business in Europe, is setting aside $1 bn in bonuses for Lehman staff, FT reports. This is for 2008. For 2009, it has promised a bonus pool as large as the one in 2008, although some of it will be in the form of restricted staff.
Were Lehman staff, who seemed orphaned until the other day, not available in the present environment without such incentives? And what implications do guaranteed bonuses have for future financial stability? If we accept that the design of compensation schemes had something to do with the present financial crisis, Nomura's offer does not seem very responsible.
In UK, the Financial Services Authority is said to be contemplating higher capital norms for firms whose bonus payments are not linked sufficiently to long-term performance. In the US, Congress is contemplating limits on bonuses as part of the bail-out plan. UK's PM, Gordon Brown, has said the present compensation schemes are "unacceptable". Nomura needs to do some explaining.