The Bonus-Driven “Rainmaker” Financial Firm: How these firms enrich top employees, destroy shareholder value and create systemic financial instability James Crotty

Analysing the data on compensation practices in investment banks and other important financial institutions the author argues that, this, by inducing reckless risk-taking by the key decision makers in these firms, created the precondition for the recently experienced global financial crisis. The paper discusses possible answers to the challenging questions regarding the source of such compensation and their sustainability over time to help build up understanding about the appropriate regulation of financial markets.

rainmaker (Download the full text in PDF format)